The Bitcoin is a form of cryptocurrency which enables individuals to buy and sell products online with extra levels of security. Launched on 3 January 2009, this interesting form of electronic exchange has seen its share of ups and downs. While this has enabled the Bitcoin to represent a fluid investment opportunity, the fact of the matter of that some of these falls have been truly massive in scale. Let’s take a look at a handful of the major crashes to better appreciate the malleable nature of this marketplace.
The First Major Crash
As we mentioned in the last paragraph, the Bitcoin is a cryptocurrency which is entirely based within the ethereal world of the Internet. While this makes it convenient to buy and sell, it is also extremely susceptible to hacking. The first illustration of this vulnerability occurred on 19 June 2011. Within minutes, the value of the Bitcoin dropped more than $3 dollars. As if this were not bad enough, it also seemed that hackers stole an incredible $460 million dollars worth of Bitcoins from an online financial firm known as Mt. Gox.
The Issue with e-Wallets
The very nature of the Bitcoin dictates that it will rely heavy upon online e-wallets and similar types of virtual electronic transfers. Unfortunately, this also leaves it highly susceptible to any sudden changes that might occur. On 11 February 2012, an online e-wallet service known as Paxum ceased accepting Bitcoins as payment options. As a result, its value crashed within a very short period of time as consumers began to panic. It eventually levelled out at just above $4 dollars although the damage had already been done.
Online Threats
One of the major issues with the Bitcoin is that it can be maliciously manipulated by hackers and similar institutions. This is exactly what occurred on 7 February 2014. A series of DDoS (Distributed Denial of Service) attacks caused its value to drop no less than $100 dollars within a very short period of time. This was one of the largest declines in history and yet, there are even more staggering losses to mention.
The IRS Steps In
The United States Internal Revenue Service (IRS) had been watching the Bitcoin carefully for some time before they declared it to represent a type of intellectual property. This caused an initial wave of panic, as investors were not certain how trading and taxation issues would be affected. As a direct result, its value fell $150 dollars before levelling out at $453 dollars.
The Chinese Connection
It is thought that China represents a significant portion of all Bitcoin transactions. However, its government considered placing trade restrictions on this currency. The resulting reaction caused the value of the Bitcoin to fall 33 per cent before finally levelling off at $889 dollars.
As we have just seen, there is a fair amount of volatility associated with the Bitcoin. It is still a fact that this cryptocurrency continues to gain popularity and some analysts even predict that it could very well replace traditional transactions such as credit cards in the future.
In this 2016 video from CMC Markets analysts Jochen Stanzl we see the most recent Bitcoin explosion explained as a side effect of banking risks in Europe.
