Should we be concerned about the sudden drop in the price of bitcoin?

Some would say no, others yes, but without being scaremongering.

On the one hand, those who say no, point out that the fall in the price of bitcoin in more than USD 10,000 dollars (although at the time of writing this note the price was located in USD 34K) responds to a behavior expected by the market . After hitting the USD 40K figure a few days ago, retail investors saw that this figure was what they expected to sell and get an extremely lucrative report on their sales. So he pointed Antoni Trenchev, CEO of Nexo: “Once BTC surpassed $ 40,000, earnings reached a level that unleashed the smallest investors who are understandably the most likely to sell quickly. There has been a flood of settlement transactions in recent days, the BTC price drop is the result of an accumulation of these transactions".

With which, it is understood that the fall does not respond to a structural defect that could lead to long-term consequences. Rather, it is an immediate response as a result of the copious sales in a very short term.

What could affect your price in the long term? Too strict regulation that does not understand the market and limits it. We could not say that it currently exists, but more and more regulatory proposals are being seen that seek to limit some characteristics of this market to assimilate it to traditional investment markets.

On the other hand, those who are most concerned about the price drop, point out that the uncontrolled rise of bitcoin bears a very strong similarity to what happened years ago with the "internet stock bubble" (it happens that at the end of the The 90s and early 2000s, the novelty of internet companies generated a speculative trend that caused their shares to be positioned “through the roof” in a very short time, which unleashed a kind of mirage of value that was never really there, naturally, it was soon seen that reality was not as great as it was painted).

In this sense, businessman Mark Cuban Indian"Looking at cryptocurrency trading, it is exactly like the internet stock bubble (...) as during the dotcom bubble (internet stocks), “the experts” try to justify whatever the price of the day is. Cryptocurrencies, like gold, are driven by supply and demand. All the narratives about devaluation, Fiat, etc., are just sales pitches. The most important selling point is scarcity versus demand. "

We must not forget the main characteristic of cryptocurrencies: their volatility. Its variation will be directly correlated with any significant change that occurs in your market, its sensitivity is high. Therefore, it is essential that trust be maintained. Everyone knows what would happen if everyone "freaks out" and starts chain selling.

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Marilú Lazo
Lawyer from the Pontificia Universidad Católica del Perú (PUCP). Director of The Crypto Legal Blog, she has experience in corporate advice, consumer protection, as well as in matters of personal data protection and new technologies.


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