The fact that bitcoin is endowed with a somewhat volatile nature does not come as a surprise to cryptocurrency enthusiasts, who saw it soar beyond $1,000 in late 2013, only to see it diminish in value again throughout 2014, and drop a further 40% at the beginning of this year.
What happened in the early hours of yesterday, however, caused shockwaves far beyond the bitcoin community. The price crashed from $224 at midnight to around $175 (a drop of almost 22%) in just a matter of hours, before rebounding again.
Unsurprisingly, the drop in value has set off a whirlwind of conversation about the future of bitcoin, both from within and outside the community.
Twitter was awash with comments throughout the whole of yesterday, as bitcoiners and commentators pondered the causes and potential ramifications of the drop.
The mainstream media has also reacted, acknowledging the extreme price movements and predicting the potential effect on the cryptocurrency’s future with varying degrees of level-headedness or hysteria.
So, what did they say? CoinDesk has rounded some up of the top headlines from yesterday.
The moderate view
Unsurprisingly, there was no real consensus across publications. While some prophesied that the future of bitcoin was bleak, others took more measured views.
The New York Times ran with, “As Bitcoin’s Price Slides, Signs of a Squeeze“, in which Sydney Ember commented that confidence was dwindling, and stating that “some mining companies have started to flash the warning signs.”
As the price of bitcoin drops, and difficulty stays relatively high, mining companies are left to assess their dwindling profit margins.
Mashable’s Seth Fiegerman explained that CEX.io, which runs a cloud mining service, had been “forced to suspend operations due to the declining prices presumably cutting into profit margins”.
The Guardian‘s piece, titled “Bitcoin price plunge sparks new crash fears“, distinguishes between what is currently happening from what occurred in the summer of 2011 and 2013:
“This time the cryptocurrency has not been the victim of a speculative bubble that then popped. Rather, the price of bitcoin has been declining fairly consistency since June 2014, when it started falling after months of temporary stability at about $600 a coin.”
CNBC’s Everett Rosenfeld, draws on recent events to explain the possible reasoning behind the current price drop, putting forward the argument that cryptocurrency speculators may have been spooked by the Bitstamp hack which saw the loss of $5m in bitcoins.
The ban imposed on bitcoin-related websites by the Russian authorities may also be a contributing factor, he said.
Doom and gloom
FT Alphaville‘s report reads almost like a bitcoin obituary and, in a rather surprising twist, draws on an analogy with one of George Orwell’s most famous books.
“With Animal Farm in mind, has Bitcoin the asset’s failure thus shone a light on a system which routinely propagandises the benefits of sharing intellectual property for free while rewarding only those who live by entirely different principles?”
It also goes on to question whether “bitcoin really represented something akin to perestroika, a political movement for reform which in reality only benefitted a select bunch of shrewd operators”.
One of the most negative positions is perhaps put forward by The Sydney Morning Herald, which described bitcoin’s entry into 2015 as “appalling,” claiming that the currency “appears to be in freefall”.
The Australian newspaper also alludes to the fact that some are crediting the market’s instability to the notable Trial of Silk Road founder Ross Ulbricht, which began in New York City yesterday.
Looking on the bright side
TechCrunch’s John Biggs throws some positivity into the mix with the headline “The Rainbow After the Bitcoin Storm“. Although he acknowledges that the current value “is a far cry from the heady $1,000 days of late 2013,” he also asserts that “unlike Robert Redford’s sailing trip, all is not lost”.
Timothy B Lee, over at Vox, claims that “Bitcoin has already fallen 40 percent this year. That doesn’t mean it’s doomed“.
Jerry Brito, executive director at Coin Center, has his say in a Wired article, opining that:
“The price of bitcoin doesn’t matter right now.”
Shifting focus away from the price, Brito compares bitcoin to the early days of the Internet and its positive evolution throughout the years:
“Unlike the early web, bitcoin has a price ticker people look at daily, and so they wring their hands. Every dip and spike in the price gets a lot of attention and spells either doom or irrational exuberance.”
Only time will tell what the future holds for bitcoin. At the time of press, however, the price had returned to around $224, and was largely recovered from yesterday’s dip.
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