Over the last few weeks, the bitcoin price has been something of a roller-coaster. We initially saw price run up to just shy of $8000 a piece as the markets headed into the proposed hard fork (Seqwit2X) but then a shock hit press – the fork was canceled and things would be moving forward as per initial expectations.
The immediate response to this was somewhat counterintuitive. With the bitcoin community generally being against the hard fork (at least, that is, those behind the original BTC ticker), expectations were that a cancellation would result in some strengthening of sentiment and – in turn – a boost in the price of bitcoin versus the US dollar.
What actually happened, however, couldn’t have been any more different to what was expected. Price crashed, first 10%, then 15% and eventually bottomed out below the $6000 mark – a fall of in and around 20% from highs.
There are a few reasons why the price fell like this, but the major one is that there was a large portion of speculative buy volume tied up in bitcoin rooted purely in expectations that a hard fork would take place and that they would pick up extra coins on the back of the fork. Once the fork was canceled, these operators no longer had any reason to stay in the market and – in turn – sold out on their holdings.
At the end of the day, the bitcoin market isn’t any different to that of another, more traditional financial asset – it’s dictated by demand and supply. When you get a large-scale exit, like the selloff described above, price is going to fall.
So what does this mean for things going forward?
Well, long-term, it’s probably not that important.
Sentiment remains as strong (if not stronger) as it was prefork cancelation and the only difference now is that a large portion of the speculative volume is removed from the equation. In turn, while this decline is a correction, that’s really all it is.
Moving forward, the bitcoin price should recover to the levels seen during the middle of last week and – eventually – beyond.
Let’s see how things play out going forward.