By Euro Weekly News Media • 27 January 2021 • 13:52
A sense of gloom seems to have descended over the crypto markets. The Bitcoin bears are out in full force, with the digital currency struggling to stay above $35,000.
Earlier, at the beginning of January, Bitcoin had an impressive bull run reaching an all-time high of $41,000. However, things only deteriorated for the crypto coin after that, suffering serious blows and plunges in value just a few days after.
Bitcoin has now lost about a tenth of its value this past week. This puts Bitcoin on course for its worst run yet since the massive sell-off and price plunge back in September of 2020 as global regulators turn their attention towards this controversial digital asset.
Bitcoin fell about 15% on Thursday, tumbling below $30,000 for a brief moment only to rally up the next day. However, despite a mini-rally on Friday, bitcoin was trading around $32,000 just a few hours later, confirming how volatile the digital currency actually is. This isn’t the first time that Bitcoin has suffered such a blow, volatility being the crypto coin’s hallmark, but the events were notable nonetheless.
Alleged Triggers For Fall In Value.
Bitcoin, last week, came under selling pressure and scrutiny after Joe Biden’s Treasury Secretary, Janet Yellen, proposed that the use of cryptocurrencies should be curtailed. This was supported by her arguing that it was being used for mainly illicit financing and criminal activity.
However, this dramatic turn of events was speculated to be a result of some rumours set loose within the crypto space. The downward trend in Bitcoin had been stoked by industry reports pouring in claiming that the same token had been used in two separate transactions, an event, referred to as “double spending”, that goes against a key rule of the market.
A double-spend problem or incident may be unfamiliar to most casual Bitcoin investors, however, preventing such an incident is absolutely crucial to maintaining the integrity of the currency. If such events are possible, then everyone would lose confidence, rightfully so, in Bitcoin causing its price to go into a free fall.
But what exactly is a double-spend problem? As evident from the name, it essentially means spending the same token of Bitcoin twice and tampering with the transaction record in order to get away with it. This is definitely something that would raise flags, however, there is no proof until now of any such incident ever happening.
To explain it simply in terms of traditional finance, the best analogy that can be drawn up is someone writing a check in order to purchase something, and then withdrawing money from their bank account before the seller gets the chance to cash the cheque.
The incident, however, was dismissed later by many analysts and termed as a non-event, saying that there was no “double spend.” Instead, it was said that the incident was just an illusion because the network was designed to only recognize one batch of transactions. Therefore, even though it briefly appeared to have been spent twice, only one of the transactions was accepted by the system while the other one was ignored.
However, that did not stop many media outlets from writing headlines suggesting a bona fide double-spend issue had occurred. All this mania led to brief panic, causing many to sell off their bitcoins.
The Growing Popularity.
Even though Bitcoin seems to be down in the dumps right now, it is expected to pick up eventually. Advocates claim that cryptocurrencies are fast becoming safe-haven assets proving to be a rewarding addition to their investment portfolios against inflation risk and currency devaluation that has been set off by the unprecedented fiscal and monetary conditions during the pandemic.
The easy availability of trading tools, like the Bitcoin Compass Software, has allowed many novice traders to gain profits successfully by capitalizing on short-term bitcoin booms. These make use of AI-powered algorithms that can scan the markets for trading insights at relatively high speeds and at a successful win rate.
Despite such sharp plunges in value, another reason why bitcoin is continuing to gain popularity is institutional interest in the crypto coin with many big names supporting the narrative of Bitcoin and curious about its future.
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