It is nothing new that Bitcoin experiences extreme price increases in a rather short amount of time.
But what are the factors that influence this extreme behavior?
Let’s find out in this article!
A big reason for Bitcoin’s rapid price increase comes down to the fact, that there are many institutional investors starting to invest in Bitcoin.
These big investment firms have so much money in their portfolios, that even if they just allocate a small amount of their portfolio to Bitcoin, it still is a huge amount of money, and can impact the price drastically.
How to know this is even true?
Bitcoin crossed the 7000 US Dollar mark first on Bitfinex, which happened because of one big purchase. After that, the price also spread onto the other exchanges.
This means, that big companies are beginning to invest in Bitcoin, and moving some of their money into this virtual currency.
But that certainly isn’t the whole truth, as there aren’t so many investment firms allocating money into Bitcoin, yet.
Instead, I do think that the main reason for Bitcoin’s large price increase is because of the normal population and mass media.
Let me explain: In December of 2017 the price of Bitcoin skyrocketed drastically, as we all know. That happened mainly because the media started obsessing over Bitcoin since Bitcoin hit 1000 Dollar per Coin and almost every large media outlet talked about Bitcoin in 2017.
The situation really exploded in December, where the only thing the media was talking about was Bitcoin, and not much more.
All of a sudden your local hair cutter was a Bitcoin-investor and everybody and their dog were talking about Bitcoin.
That led to a lot of uneducated people to invest in Bitcoin and the more the media talked about Bitcoin, the more people were exposed to Bitcoin, which in turn leads to more people buying Bitcoin and an increase in price.
And the further the price increased the more the media was incentivized to talk about Bitcoin, since it was a really big deal and a lot of people were interested in it.
That is, in my option, the main reason behind Bitcoin’s rapid price increase in December of 2017.
Another thing I would like to talk about is why, in my opinion, Bitcoin’s price experienced such a downward-trend in the beginning of 2018.
I think that when Bitcoin hit 20.000 US Dollars per coin in late 2017, the market was already so saturated that experienced investors new, that the price of Bitcoin was ridiculously high for that point in time.
So my guess is, that several large Bitcoin investors started selling their Bitcoins off, creating a bit of a bumper in the market.
Then I think, that many uneducated people where frightened to lose their money with Bitcoin and started selling off, too.
That in turn created a big shock in the market, because the mass media always talked about the Bitcoin price going straight up, but now it is going down like a falling knife.
So more and more panic was spreading around and many people that invested at these high prices were afraid to lose the money they put into Bitcoin, and are now panic-selling.
That is why I believe there was a big bear market in the beginning of 2018.
I really hope you found a lot of value in my article, and are now more informed about Bitcoin’s big price increases, and it’s big downward spirals.