Bitcoin dropped below $4,000 as a massive selloff in the cryptocurrency market continued over the Thanksgiving weekend.
The price of a bitcoin fell as low as $3,604 during the sell-off. It has lost some 80% of its value from highs reached late last year when the price of bitcoin eclipsed $20,000. Bitcoin has fallen 40% in just two weeks of November. It was the worst price drop since April 2013.
Other cryptocurrencies including ethereum and ripple have seen similar price drops.
Trading volumes have also fallen off. Bitcoin’s 24-hour trading volume fell under $4 billion on Saturday evening. I was the first time crypto markets have seen trading volumes under $4 billion since last November, according to CoinMarketCap.
A fork in bitcoin cash earlier this month seems to have sparked the selloff and it has continued to maintain momentum.
Fork in the Road
What exactly is a “fork?”
It’s basically what it sounds like. It’s when a single crypto blockchain splits in two, creating two separate cryptocurrencies. LongHash describes it like this:
“In the context of blockchain, you can think of a software fork as being like a fork in the road: it’s the point where the users behind a project can’t agree on a direction, so they split up and head in two (or more) different directions. A soft fork, in which a new but still backward-compatible chain is created, isn’t too big a deal. You can think of these as software updates; they represent changes to a blockchain’s software but they don’t actually split it into wholly separate chains. Hard forks do create wholly separate chains, and that’s why hard forks like today’s Bitcoin Cash fork are a big deal. What was once a single project with a single blockchain has become two separate projects on two separate blockchains. Often, that results in a pretty significant price drop for one or sometimes both of the tokens on these blockchains, as it forces commercial partners, developers, and members of the community to pick sides.”
The reasons for the fork in Bitcoin Cash are technical and complicated, but the bottom line is it has shaken confidence in the broader cryptocurrency world.
There is also concern about increased regulatory scrutiny.
Peter Schiff’s Viewpoint
Some in the cryptocurrency world are optimistic about the price drop. One investor on a Reddit forum said this was a buying opportunity. “Last year I could only dream of owning 1 bitcoin, now it’s possible . . . I wanna see this thing go so low I can afford to buy 20.”
Last year when the price of bitcoin was climbing toward $20,000, Peter was saying it was a giant bubble. He’s held that position consistently and thinks there is more air to come out. In his most recent podcast, Peter said we’re closer to the top than the bottom.
“If we fall another 80% from here, we’re at $800. That’s still high as far as I’m concerned. And I think we’re going to fall another 80% quicker than we fell the last 80%. So, we’re much closer to the top, as far as market cap, than we are to the bottom in all these cryptocurrencies.”
Some Good News for Bitcoin
There is some good news for bitcoin. Beginning this week, Ohio businesses will be able to pay their taxes in the cryptocurrency. Wall Street Journal reporter Paul Vigna wrote that while Ohio’s initiative doesn’t grant the cryptocurrency legal status, “it would be a kind of tacit approval bitcoin has so far lacked.” He noted that Arizona, Georgia, and Illinois have each considered similar programs.
The Ohio treasurer’s website touts the state as one of the first governments in the world to accept cryptocurrency.
“Treasurer Mandel believes in leveraging cutting-edge technology to provide Ohioans more options and ease while interfacing with state government. The Treasurer’s office is also working to help make Ohio a national leader in blockchain technology.”