Weighed down by risk and fear, Bitcoin’s value is rising as economic concerns rise that a recession could be looming.
The value of Bitcoin went down 35 percent last week, according to CNBC. In November, Bitcoin was at about $68,000, but on Saturday it had fallen below $18,000 before closing out the day at around $19,000.
The BBC said Bitcoin’s value is a reflection of confidence, which is found in increasingly short supply as months of inflation are giving way to predictions of a recession.
“The more people sell, the less Bitcoin is worth, because that’s how it works – its value is pegged to its desirability. This has a knock-on effect of more people selling because they can see the value going down… and the cycle continues,” the BBC explained.
Financial Times editor Katie Martin said the value of Bitcoin is solely in the eye of the beholder.
“The price is only and purely whatever people are prepared to buy it from you for,” she said.
“That’s when it gets scary for people because, if enough people head for the exit, there’s no floor. There’s nothing to stop it trading at $10,000 tomorrow if enough people give up or are forced to sell,” she said.
Others told CNBC that the entire cryptocurrency market is facing some tough times.
“I think that we’re in a long drawdown period here,” Jill Gunter, Espresso Systems co-founder and chief strategy officer, said.
Are we heading for a recession?
“I think that we’ve taken the elevator down, and I think that we, as an industry, are going to have to take the stairs back up and climb out by building real utility,” she said.
Gunter called the shakeup a “healthy washout.”
“One doesn’t want to, as a builder, as an investor for the long-term… be in a market where it’s being driven by just short-term price action, by speculation, as, let’s be honest, the crypto market has been largely over the last couple of years,” she said.
Paxos CEO and Co-Founder Charles Cascarilla indicated there was an air of inevitability about the fall in value.
“We had financial instability because of this opaque leverage, you just couldn’t tell where all these risks were building up,” he said.
“In some ways, this is just an age-old story. You’re borrowing short and lending long. And I think it’s really unfortunate that people lost money, and I think it will, in some ways, set back the space, because you will lose some early adopters or some of the people who just came in new to the space,” Cascarilla said.
The unique nature of cryptocurrency adds to the collapse in value, said one commentator
“The fundamentals to support stabilization and recovery just aren’t there,” Steven McClurg, co-founder and CIO of crypto fund manager Valkyrie Investments, said according to Bloomberg.
“Things can and likely will get worse before they get better,” he said.
