Why is Bitcoin Dropping

5th February 2021

Whether you’ve been in the crypto market for a while or you’re new to them, there’s no doubt that you are aware of the recent Bitcoin bull run. After the markets took a steep dive in March following the pandemic, Bitcoin did well to climb its way up and out of the slump. In fact it didn’t stop climbing, and hit new all time high after all time high over December and early January 2021. So why is Bitcoin dropping now? Let’s walk through why the cryptocurrency is seeing a decrease in price.

What Is Bitcoin?

For those that are new around here, Bitcoin is the first cryptocurrency to come into existence. Bitcoin was designed as a response to the Global Financial Crisis in 2007 and created an alternative monetary system, one not governed by banks and governments. The cryptocurrency offers users a peer to peer payment system that requires no middleman and can be conducted from anywhere in the world. Revolutionising cross border payments and including the unbanked populations of the world, Bitcoin has brought a much needed disruption to the entire banking system.

Bitcoin in 2020

Taking a look at Bitcoin’s previous 12 month cycle, Bitcoin opened the year trading at around $7,200. The cryptocurrency gradually gained traction before it was struck by pandemic destruction, along with hundreds of other markets around the world. In March, Bitcoin hit lows of $5,000 before slowly making its way up. By May the price had reached $9,000 and by July it hit the $10,000 mark. On Cyber Monday, Bitcoin reached a new all time high when it hit $19,850. Throughout December the price kept climbing until on 8 January it hit the most recent all time high of $41,941.56. There was a quick drop in price, then a quick incline, and then gradually the price started dropping.

Why Is Bitcoin Dropping?

After an impressive year of strong organic growth in adoption, the cryptocurrency saw increased demand from corporate, institutional and retail investors. It is not unusual for markets to drop after strong bull runs, in fact in previous markets drops of 25% have been witnessed as investors withdrew their profits. When prices reach such high points it is natural for investors to engage in sell offs, selling their digital assets for fiat.

Simons Chen, executive director at Babel Finance stated that “The correction we saw was expected as we believe the BTC price surge recently from under $20,000 to $40,000 in the past four weeks will induce sell pressure.”

The drop in the market should also not be viewed as a bad thing. Markets correcting is part of the natural cycle, and also provides an entry point for new investors. If you are looking for a right time to enter the market, consider buying in the dips. You can buy Bitcoin through the Tap app fast and efficiently, using simply a bank transfer. The app is streamlined to ensure the service is reliable, trustworthy and as simple as can be. The app also provides access to a secure cold storage wallet that can hold your BTC long or short term.

Despite the recent drop in the market, entirely predicted if you speak to the right people, long term sentiments toward the cryptocurrency remain bullish. “This short term correction is both natural and needed, and is a great entry point for long-term investors as we quickly reach $50k this quarter and $100k by year’s end,” said Jehan Chu, founder Kenetic Capital.

Bitcoin Market Hits New Maturity

Despite the current decline in value, Bitcoin is still up 300% in the last 12 months. Over the past year, the cryptocurrency has seen incredible corporate investment, as well as (positive) mainstream media attention. The adoption rates have increased greatly and the entire crypto market has taken a giant stride forward. Even PayPal made their support for the cryptocurrency, among others, public when it announced that it would be supporting crypto as a payment option through the platform.

If you were on the fence before, as you wonder why is Bitcoin dropping, consider asking yourself “when am I going to buy in?” instead. It’s about time you tap into the future with Tap Global and the future of alt banking.

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