After an incredible bull run last year (from the 1st of Jan 2017 till the 31th of December 2017) Bitcoin produced an incredible ROI in fiat terms. At the ATH of 19666 USD (according to Bitstamp) Bitcoin produced an almost 2000% return on investment. This in itself is an amazing achievement on any investment related opportunity, but we all know that gains like these can’t hold up forever. In the last few weeks Bitcoin was dropping in a growing speed and reached a price level of 7150 USD at the time of the article. We wanted to help you get a wider perspective on possible reasons for the Bitcoin drop and also want to hand you bit of information that might help you with future investing.

Market cycles

Firstly when looking at these markets, or even traditional markets, you have to understand that market cycles (and huge swings in general) simply are bound to happen. One could speculate on the reasons on why it happened, but there will be no definite answers on this. A few possibilities: wealth distribution, profit taking of early investors, tax cycles, profit taking, etc.

Fact is that this isn’t Bitcoin’s first market cycle and probably not the last either. Just look at the historical chart of Bitcoin:

Remember 2013? The year of the MtGox hack. That was the first really major market cycle. We can argue that a hack of that volume was the sole reason for the crash, but there was not a single hack or bad press recently and we are still looking at another major market cycle. You can check any of the altcoin charts that have a multi-year history and will soon find out that BTC is no exception from this. Is this a bad thing? No, it’s completely normal and because there are no critical flaws in the fundamental technology behind Bitcoin we are completely sure that it will be fine for the years to come.

Parabolic growth

Parabolic growth and decline afterwards can be closely linked to market cycles. It’s simple physics really, what goes up must come down sooner or later, even if in this case the bottom or base of the drop will be probably a lot higher than previous bottoms. The reason why we think this is because there has been no real decline in media interest or market interest in Bitcoin. As the recent U.S. Senate hearing shows us even politicians are opening up to the fact that cryptocurrencies and Bitcoin are here to stay and that the underlying technology is not something that can be ignored.

As the image taken from steemit user @mycryptoacademy shows us every historical pullback was the result of previous parabolic growth. Currently there doesn’t seem to be any statistical or fundamental evidence that this time would be different.

Negative media attention

Another reason for a rapid decline could be the constant inflow of negative media attention flowing in after the price ATH (All Time High). We have seen all sort of ban or over regulation news coming from:

We could link tens or not hundreds of these articles. Most if not all seemed to be a result of less optimal translations or over-speculation. These articles were labeled as the downfall of Bitcoin even though major economic countries like the U.S., South Korea, Japan and Russia are on the way to building the actual legal framework to support Bitcoin and cryptocurrencies in general.

We have witnessed the roll out of Bitcoin to 260,000+ stores in Japan or the recent U.S. Senate hearing where even the Senate members couldn’t deny the importance of these new emerging technologies and there was no word of a ban or over regulation.

Conclusion

We don’t intend to put words in your mouth or do your financial decisions instead of you, but we at WalletInvestors think that as long as there is no fundamental flaw in the technology we will see the further growth of these technological advancements and the paradigm shift that will transform how we manage our finances or how we store our data. Surely the wild-west of the cryptocurrencies will soon be regulated and we may witness some form of transformation, but overall we see everything as fairly positive.