Bitcoin continued its price retrenchment over the long holiday weekend falling by nearly 3% in Christmas day trading. This represents a continuation of a 4-day slide in Bitcoin value.
Bitcoin was down nearly 2.7% in Christmas day trading. That represents a decline of more than 29% off its record high of $19,511 set back on December 19th. The 4-day slide in the currency is the longest lasting decline since 2015.
Cryptocurrencies have tended to snap back very quickly after declines and not maintained declines for more than a few days at a time. Analysts have attributed this correction to several different factors.
On December 18th, the CBE group began trading Bitcoin futures. The arrival of Bitcoin futures allowed traders to more easily take short positions against Bitcoin. In fact, the all-time high coincided with futures trading and the slide began shortly after futures trading began. Short positions allow the currency to rise and fall more easily. Bitcoin futures have certainly solved some of the issues with Bitcoin liquidity and should allow more trading of Bitcoin in the future.
Christmas Profit Taking
Mati Greenspan of eToro Trading noted that much of the Bitcoin trading is in dollars and not Yen or other Asian currencies. This represents a large amount of profit taking in the run-up to Christmas spending. If this is the case, after the holiday, Bitcoin should continue its price increase as Christmas time profit taking ends.
According to Mati Greenspan, it’s inevitable that any asset that increases 150% in a single month will experience a double-digit correction. The correction was inevitable and a healthy reaction to the market. The correction has no impact on what the future market for Bitcoin will be.
Bitcoin Is Maturing
Another view is that Bitcoin is maturing and that it’s not without flaws. Bitcoin is the gold standard of cryptocurrencies, but its flaws make it less than ideal. Its block generation time slows down transactions and leads to wild fluctuations that will only increase over time. Other cryptocurrencies like Ethereum do not have the same issues and have continued their increase in recent days. Ethereum was up 6% in Christmas trading.
The real reason for the correction is probably a combination of all of these factors. 2018 should represent a banner year for cryptocurrencies as they move more and more into the mainstream. Bitcoin traders just need to get through this holiday season.