Concerned By The Recent Drop In Bitcoin’s Price? Don’t Be.
A Perspective Check on Bitcoin Price Fluctuations
A Very Brief Review Of Bitcoin’s Ten-year Price History
Bitcoin first broke $7,000 on Nov 2, 2017.
Bitcoin next dropped below $7,000 June 11, 2017.
Bitcoin hit $7,000 again on July 17, 2018.
Bitcoin’s price vacillated above and below $7,000 for a couple of months, but then dropped below $7,000 on September 5th, 2018, and didn’t reach $7,000 again, until this past Saturday, on May 11, 2019.
In the last 48 hours, Bitcoin’s price reached and slightly exceeded $8,000 (May 15, 2019), but then pulled back to about $7,884 the next day (May 16, 2019).
Which brings us to today (May 17, 2019). Overnight, a Bitcoin “whale” (a holder of large amounts of Bitcoin), sold 5,000 BTC for $6,200, on the popular Bitstamp exchange.
Note that price. Why? Maybe that whale got his or her Bitcoin for next to nothing, so that figure represented a major profit.
Or, maybe, as many surmises, that trader sacrificed $2,000 per Bitcoin, thanks to “fat finger syndrome”, and had actually intended to sell at $8,200 (a much more likely sell-side price).
From a related article on Bitcoinist.
“A trader on the Bitstamp exchange reportedly put up a sell order of 5,000 BTC at an oddly low price of $6,200. This move caused a massive price plunge on the exchange, setting up a temporary arbitrage opportunity.
The effect soon spread across the market to other exchanges with the BTC market average falling to about $7,100. As at press time, Bitcoin had rallied to $7,300 on most of the popular BTC exchange platforms.”
“Details are still hazy at this point but there are three likely theories for what happened — a whale dump, fat finger error, or a bot glitch. However, given the lack of significant volume variance at the time of the crash, it seems unlikely that the crash was as a result of a deliberate dump.
On the flip side, looking at the chart from Bitstamp, the dump occurred over a 10 to 12-minute period with the orders being continuously executing at consecutively lower levels than the market price.
Such a pattern reeks of manipulation but the tradeoff seems counterproductive unless they held high leverage short bets on another exchange, say BitMEX. Theoretically, the dump would cause massive liquidation of long positions thus ensuring profits for the trader.”
The Perspective Check Part
And so, out of Bitcoin’s ten-year history, with roughly six of those years offering commercial availability, if you purchased Bitcoin during any of the sub-$7,000 time periods — the vast majority of the intervening time — you’re in a profit position right now.
Bitcoin has attained a certain ATTATH (At The Time All-Time High) multiple times, before quickly pulling back a bit, and then rising beyond, to a new all-time high.
One example of this are the Bitcoin price dynamics in late 2017. Bitcoin first attained $7,000 on November 2, 2017, and then dropped back all the way to a low of $5,519 on November 12, 2017. From there, it started to rise again, briefly breaking $20,000 on December 17, 2017, an ATH (All Time High) it has held since that time.
Balanced perspective is both good, and critical to long-term success, in any high-risk, high-reward investment market. Bitcoin is no exception. And because many media commentators and bloggers don’t understand Bitcoin and other cryptocurrencies, the tone of any significant price drop tends toward the histrionic. This can be safely ignored by long term investors and short term investors who are qualified to do their own research. And everyone else. Which is pretty much the entire point. There’s a phrase in the so-called cryptosphere: “Buy the dip”.
When a given market, such as Bitcoin, is generally trending upward and then experiences a substantial dip in price, the Bitcoin savvy tend to buy the dip, to treat that price drop as a short term sale, and then keep holding for the long term. This doesn’t work perfectly, but I think it’s fair to say that those who understand the Bitcoin market fairly well have often made money doing this. Which is specifically why there’s no need to be concerned about the very recent and current price dip, from this past week’s highs, which were also 2019’s highs.
Finally, never invest more than you can afford to lose, invest wisely, and do your own research.
Disclaimer: Please note that any mention of investment or trading is solely my personal opinion, and is not to be taken as investment advice, in any way. Also, please note that some posts may contain affiliate links for services that I use and recommend, which pay a small amount for the referral.
Doug Sandlin is a performance optimization consultant for startups, blockchain projects, and digital asset projects and investors. For more information, please visit https://dougsandlin.com