Bitcoin Not For The Faint of Heart

After taking out the $3,000 USD/coin level for the very first time earlier today, Bitcoin proceeded to drop by $500 a coin over the course of just eight hours.

Bitcoin, which is the world's largest cryptocurrency, has had a very interesting couple of weeks, as it has been featured in many mainstream publications, including the front page of the Wall Street Journal. This increased coverage has led many people to purchase the cryptocurrency for the first time, as their bullishness is buoyed by the people who breathlessly predict that one Bitcoin could rise as high as $1 million/coin in the future.

This stampede into Bitcoin will obviously translate into some pretty crazy volatility, which is what we saw today. As the smaller hands move into Bitcoin, the volatility will become more pronounced as the late buyers will likely hit the exit door much quicker than somebody who has held for a long period of time.

The fact of the matter is that there is not a tremendous amount of Bitcoin available to be purchased, so large buyers or sellers can cause dramatic moves in the cryptocurrency. This played out earlier today, as Bitcoin dropped roughly $300 over the course of a single hour.

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Having said all of this, Bitcoin (and other cryptocurrencies) is enjoying a tremendous year, and today's fast drop doesn't have much impact on the cryptocurrency's parabolic rise over the past 6 months.

A number of factors have resulted in Bitcoin shooting to the moon the year, including the widespread adoption by the Japanese and increased coverage by the mainstream media.

Some argue that the mainstream media coverage is the signal of a top in the cryptocurrency, while others believe that this is just another step in a prolonged move higher.

Mark Cuban has recently become more vocal on Bitcoin, as he has said that he believes that the cryptocurrency is in a bubble, while others believe that the move higher is just in its early stages.

What do you think?

Filed under: General Knowledge