Christmas greets bitcoin with a sale, giving a 50% discount as we near the new year, but is that discount actually a premium? Has the music stopped and the bubble burst?
That might be a question on many minds this Christmas eve, with the answer unprovidable by anyone, but time itself. Bringing to mind a more interesting question: is this April 2013, December 2013, or May 2017?
After a stupendous bull run to $260 in just days, bitcoin crashed to $50 in April 2013. The ostensible reason was an MT Gox DDoS, creating panic, but price had risen too high and too fast, with the market itching to turn.
When it did, the speed of fall was magnitudes faster than the rise. All were glued to the screen after the DDoS, pressing F5, and as soon as trading opened, they almost all sold.
The bounce to around $230 or so was almost as quick as the crash, but that eventually gave way to sideways at around $100 until a few months later, in winter 2013, a bull run begun again.
With speed in days bitcoin rose from around $150 to a new high of around $1,000, up everyday for a couple of weeks as China entered the market biggly.
The communist central government quickly tried to end the party, declaring, in effect, bitcoin commerce to be illegal, forcing Baidu and other Chinese tech giants to no longer accept the currency.
Then MT Gox finally made an exit with a big bang, taking with it billions. On the news, the price action wasn’t much different than April 2013, sharply down with great speed to around $200, bounce with equal speed to $800 or so, then a relentless downwards pressure until the $160 bottom during summer 2016.
The two have in common an external event that either caused or added fuel to panic at times when the market was already on edge after a fast rise, but what was different is that in April 2013 everyone felt nothing had changed, while in December 2013 the mood was understandably very sombre.
Which makes May 2017 the only time when a crypto bubble has burst without a major external event that whether it caused it or not was nonetheless clinged to by the market.
Coming out of the Slockit DAO disaster, and following a very cold winter 2016, Ethereum began slowly rising in February this year after reaching a bottom at $5.
The currency turned towards a bull market, with price gradually rising to a very brief high of $420 in May this year. A high that was met with a sell-off, sending it down to $250, before settling at around $300, for a few weeks, to then gradually fall to a bottom of $150.
Unlike bitcoin’s 2013 crashes, or eth’s Slockit DAO crash in 2016, there was no “cause” for the May 2017 “crash.” The market simply thought it had risen too high, with sellers starting to outnumber the buyers, a situation that lasted only a few weeks as Ethereum then went on to double again to $800.
There has been no real “cause” for this crash we are witnessing either, as far as we are aware, but sentiment may have turned, at least in the short term.
For ethereum, it probably was a case of sell in May and go away. For bitcoin, it could well have been the case of sell before Christmas and enjoy the festivities.
Everyone was perhaps done buying bitcoin as a Christmas gift, with many probably wanting to enjoy some luxury in this fine season, thus may have taken some profit.
Which could very well be a temporary thing before another leg up in a few weeks, but whether that is the case or the very opposite remains to be seen, and until time does tell, perhaps we should just enjoy Christmas.