The price of Bitcoin price has declined below the $4,000-level, extending its losses in overnight trading to reach a three-week low of $3,275. This represents a 35% drop from its high of $5,000.
Put differently Bitcoin is now trading virtually flat month-on-month for the first time since mid-2017.
Possible reasons for the decline
There are several possible reasons behind the recent drop in the price of the number one virtual currency. One of these is the alleged plan by the government of China to ban the activities of various cryptocurrency exchanges in the country. The government has not formally announced any plan as such, but much rumor and innuendo abound.
Charlie Lee has been tweeting about this lately. He is the brother of BTCC CEO Bobby Lee, so many believe he has insights into the government’s plans toward Chinese exchanges. When critics pointed out that BTCC competitors OKCoin and Huobi had announced they were still open for business, Lee chortled:
OKCoin and Huobi are meeting with regulators tomorrow. They might soon change their tune. ? https://t.co/sS05td86X4
— Charlie Lee (@SatoshiLite) September 14, 2017
Another possible reason for the price drop is the sharp criticisms made by JPMorgan CEO Jamie Dimon on Bitcoin.
However, there is the possibility that even if China heavily regulates exchanges in the country, it will have small effect on Bitcoin in the long term as the over-the-counter (OTC) market for the digital currency will continue to post solid performance. China also makes up a much smaller percentage of global trading volume than in the past.
The negative comments by Dimon on Bitcoin are not also surprising since if Bitcoin goes mainstream, Dimon is likely out of a job.
Some on the /r/bitcoinmarkets subreddit, such as joyrider5, believe this is simply a technical pullback. The price touched an important psychological level ($5,000), possibly leading to a sizeable amount of profit-taking. It’s important to remember that nothing can go straight up forever, and that corrections are healthy in the long run.
Some believe that the price of Bitcoin will reach a low of $3,000 which will be followed by a rally back into the low-$4,000s and possibly beyond. Until then, Bitcoin will only regain its bullish position if it surpasses the $4,400 level.