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What are the reasons for the fall in the price of Bitcoin?

Bitcoin went from being the hottest asset to almost being a dirty word. What happened in between?

Bitcoin has once again garnered the attention of the media and public opinion in the last two weeks. However, it was not by reaching a new all-time high but on the contrary. BTC hit monthly lows near $ 31,000 and, after recovering above $ 40K, fell back to $ 33K.

With this 50% drop from the ATH of USD 64,000 in April, many people began to doubt the crypto currency, some sold their stocks, and the analysis, speculation and mistrust in a system that, despite the collapse of the last month, if compared to the same month last year, maintains growth without precedent or comparison with another asset: in May 2020 BTC was trading around USD 9,000. Today, the top crypto currency is trading above $ 32,000.

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Despite these numbers, bitcoin went from being the fashionable asset to almost being a dirty word and a source of ridicule and memes. What happened in between? From Elon Musk’s tweets that argued, erroneously, that Tesla would not accept more BTC in part payment for crypto mining energy consumption, to China’s bans and million-dollar liquidations, the price of bitcoin experienced some of his most volatile days.

In this regard, Marion Laboure, an analyst at Deutsche Bank in London, said this week that Bitcoin is still struggling to secure its place as an official asset class and that while the currency has advanced considerably in recent years; many people continue to consider it. Purely as a speculative tool and has failed to gain as much traction as traders might think: “Bitcoin transactions and tradability are still limited. The real debate is whether rising valuations alone can be reason enough for bitcoin to becomes an asset class, or if its lack of liquidity is a hindrance. ”

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Laboure explained that due to bitcoin’s limited tradability, it is expected to remain ultra-volatile. That is why a few major purchases or additional market exits could significantly affect the balance of supply and demand and therefore the price of bitcoin.

According to Laboure, bitcoin, which was initially designed to serve as a payment method, has failed to prevail to buy goods and services. Otherwise, it is purely speculative, which means that people only buy it thinking it could make them rich.

The economist ended her argument by projecting that the price of Bitcoin will continue to rise and fall depending on what people believe it is worth. This is sometimes called the “Tinkerbell effect,” a recognized economic term based on Peter Pan’s claim that Tinkerbell existed simply because children believed she existed.

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