The cryptocurrency markets are coming off of a tumultuous weekend, where Bitcoin set fresh 2018 lows in the $3,000 region.
Over the weekend, Bitcoin (BTC) fell to lows of $3,600, setting a new yearly low that is 82% lower than its all-time-high of nearly $20,000, which was reached in December of 2017. At the time of writing, Bitcoin is trading down over 9% at its current price of $3,640.
Despite hovering around its yearly lows, Bitcoin appears to have formed a new support level at $3,600, which has now held as support on two occasions, including once earlier this morning, where Bitcoin sharply bounced to over $3,800 after touching this level. This support level will be solidified based on whether or not BTC can continue to hold above this price.
Analysts speculate that one factor contributing to Bitcoin’s latest drop is a falling hash rate, which is the result of miners shutting off their rigs due to the persisting bear market that has significantly hampered their profitability.
Charles Hayter, the CEO of cryptocurrency price comparison site, CryptoCompare, spoke to CNBC about the link between BTC’s hash rate and its price, saying:
"Bitcoin has been correlated to its hash rate and with it now falling, so is the price. The idea is that the hash rate gives some idea of what underlying opex (operating expenses) and capital costs people are willing to utilize to generate bitcoin and give it a benchmark price."
The recent price drop has also led investors and traders alike to question what the true financial value of Bitcoin really is.
Stephen Innes, the head of Asia Pacific trading at Oanda, warned investors against having lofty price expectations for Bitcoin, saying that the price won’t necessarily reflect the value of the technology at all times.
“There is nothing normal nor positive about this type of price movement so beware of false prophets selling soothsayer storylines and never get anchored to a price. Just because BTC is trading below $5,000, $4,000 or $3,000 for that matter, doesn’t mean bitcoin is undervalued even more so when BTC offers up no intrinsic store of value,” he said.Could Now be the Perfect Time to Buy?
The old adage of “buy when there is blood in the streets” could be more relevant now than ever, especially if investors have a long-term mindset for generating wealth through their cryptocurrency holdings.
At the time of writing, major altcoins with significant future prospect are trading near, or at, their 2018 lows, which could signal that a bottom is right around the corner.
At the time of writing, Ethereum (ETH) is trading down nearly 10% at its current price of $105 and is just a hair above its 2018 low of $100. Although ETH has been battered, mainly due to the amount of ICO projects selling off their holdings, the tech still has significant prospect that could lead to significantly higher prices in the future.
XRP is another cryptocurrency with major future prospects that is trading at low prices. At the time of writing, XRP is trading down 6% at its current price of $0.345, slightly off of its recent lows of $0.32 and significantly off its year-to-date lows of $0.24. XRP is seeing increased real-world utilization through products like Ripple’s xRapid, and Coil’s internet-based rewards system, and this utilization could lead to higher prices in the future.
Although the recent market turmoil has caused many investors to lose confidence in the cryptocurrency markets, it is important to consider the long-term value of the technologies and to question whether or not 10%, 20%, or even 30% swings today will matter five or ten years down the road.