How Many Bears Does it Take to Burst a Bitcoin Bubble

If the markets were of the opinion that Bitcoin was enemy number one to the financial markets, the torrent of opinions coming from leading figures in the financial industry in the last few days certainly justifies such a view.

With the cryptomarkets falling back from December and the start of the year record highs, leading figures have seized the opportunity to kick Bitcoin while it’s down.

Goldman Sachs this week issued a warning that cryptocurrencies have now moved into bubble territory, with the warning coming in spite of the Bank setting up a Bitcoin trading desk for its clients, looking to benefit from the heightened interest in the cryptocurrency market.

UBS Chairman Weber has also joined the ranks of the bears, stating that Bitcoin is not an investment that the Bank would advise on.

Perhaps JPMorgan CEO Jamie Dimon feels somewhat vindicated for his rants last year, though even Dimon shifted away from his previous call on Bitcoin being a fraud, whilst maintaining his bearish view on Bitcoin this year.

The World Economic Forum in Davos has provided the platform for the Bitcoin bears to speak in one voice and one wonders whether cryptocurrency investors that entered the market late last year are beginning to listen.

One would certainly think that there is some influence, when looking at the cryptocurrency market caps this week.

Bitcoin’s market cap has fallen to $175.6bn, with Ethereum dropping to $93bn and Ripple down to $48.6bn.

When looking at how far the market caps of the 3 largest cryptocurrencies have fallen in just a matter of weeks, such declines would suggest that speculative investment has been driving the cryptomarkets and few can deny that. After all, it would be imprudent to suggest that 400% moves in a matter of days is based on a cryptocurrency’ tangible offerings, which continue to be limited at present.

With talks of hackers stealing millions from cryptomarket initial coin offerings, not to mention from the crypto exchanges themselves, it is more akin to the Wild West than an investment option for the everyday investor on the street.

Governments and regulators have also been vocal, with news of the South Korean government imposing a 24.2% taxes on the crypto exchanges another blow for the asset class, which continues to face uncertainty.

If bubble psychology is anything to go by, the emotional investment that contributed to the meteoric rise in cryptocurrencies last year may have now shifted to a more logical one, with the increased number of calls for caution akin to the preludes of a bubble ready to burst.

For Bitcoin and the rest of the cryptomarkets, there is just one distinct difference and that is the fact that the cryptomarkets lack regulatory oversight.

Cryptomarket manipulation has been rife and is unlikely to abate anytime soon, with the Bitcoin Billionaires eager to maintain current levels.

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Looking at Bitcoin’s moves in the last 24-hours, Bitcoin fell 13.2% from Monday’s open to yesterday’s intraday low $10,028.4 before recovering to log a 6.5% loss for the day.

Through the first part of this morning, Bitcoin fell 5.62% from the open to this morning’s $10,202 intraday low.

Few would argue that the trend is nothing other than bearish at present, with even the most optimistic needing to pause and consider what lies ahead for the day and the remainder of the week.

At the time of writing, Bitcoin has managed to recover from its intraday lows, down 2.76% to 10,510.7, finding plenty of support at $10,200 levels, but the question does need to be asked on how long the support levels will last before the market buckles and begins to move southwards with more conviction.

While the decentralized ethos of Bitcoin and the cryptocurrencies in general is meant to keep it free from the influences of governments, regulators and financial institutions, what we have seen in recent weeks is quite the opposite.

There is no doubting that blockchain technology is one that will likely stand the test of time, the doubts are whether the cryptocurrencies can hold on to current levels.

History suggests not, but that doesn’t mean that there aren’t going to be some wild swings before it all moves to levels that even the most bearish can stomach.

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