Summary
  • In the prior two weeks, Bitcoin’s price has fallen by 43.22%.
  • The U.S. Department of Justice has commenced an investigation into Tether.
  • The technical picture of Bitcoin shows that the cryptocurrency will be trading in a box range pattern in the coming days.

The past two weeks have been very tough for Bitcoin (BTC-USD) investors. This is as the cryptocurrency (COIN) has fallen by 43.22% from $6,485 to $3,663. However, I believe the downfall will now slow down as I expect the cryptocurrency to commence a sideways formation in the coming days. Thus, to ascertain the likelihood of this occurring, I will look at the fundamental news affecting the cryptocurrency, whilst also analysing the charts using technical analysis tools.

Fundamental news:

The U.S. Securities and Exchange Commission:

In my opinion, the U.S. Securities and Exchange Commission is one of the key reasons behind the large bearish drop of Bitcoin. I say this as the SEC’s actions against ICOs and crypto exchanges, coupled with its slow pace in regard to the approval of new crypto instruments, have placed a great deal of bearish pressure on Bitcoin and the whole cryptocurrency market. Moreover, the troubles of the cryptocurrency market have further escalated due to the U.S. Department of Justice commencing an investigation into Tether. This is as the DOJ suspects that Bitcoin prices were manipulated in 2017. This, I believe, is very bad news for Bitcoin, as any future rally may be perceived as manipulation and cheating.

Cross of Death:

I believe one of the key risks that Bitcoin faces in the coming days is the ‘Cross of Death’, This is when the prices decline below the cost of production. If this were to occur on a large scale, then there’s no saying when and where the tumble may end. I say this as it would cause a reduction in the level of Bitcoin mining. Moreover, this trend has already commenced as the Bitcoin hash rate has fallen by more than 12% from its maximum hash level. This occurred due to the shutdown of ASIC miners in areas where the cost of production is already higher than the current Bitcoin price. Thus, in my opinion, if Bitcoin were to fall below $3,500, then I believe there will be a substantial decline in the amount of mining capacity allocated to it. Hence, this would trigger a further slide in Bitcoin prices.

MSc Finance, Portsmouth Uni., BSc Economics Finance Banking, Portsmouth University