Bitcoin fell below $10,000. What are the reasons behind it?

The carnival came to an abrupt end, and the price of Bitcoin fell below $10,000

Since May, Bitcoin has continued to break through highs. It took only one month from 7,000 to over 10,000. Other mainstream currencies have also seen a sharp rise. Digital currencies, led by Bitcoin, are showing a bright trend, and a bull market is imminent. On June 27, Bitcoin broke through 13,000 US dollars, reaching its peak, with an increase of more than 20%. The cryptocurrency circle, which had been silent for a long time, ushered in an unprecedented carnival.

The rise in June was related to good news, the most important of which was that the social giant Facebook officially released the white paper of the digital currency (stable currency) Libra, which caused a great shock outside the cryptocurrency circle. People believe that Facebook's issuance of currency for mobile payments is a great boon to the cryptocurrency circle, which can not only bring more users to the cryptocurrency circle and increase the exposure of digital currency, but also drive the large-scale implementation of digital currency small-amount payments. In addition to Facebook's issuance of currency, there are also rumors that EOS will release a major upgrade in June; in early June, Tron founder Sun Yuchen successfully bid for the Buffett lunch...

June was full of positive news, but in July, the market reversed sharply and experienced a "waterfall-like" plunge. The Bitcoin market has become a "roller coaster" that takes a sharp turn. Last weekend, digital currencies led by Bitcoin experienced a "waterfall-like" plunge, especially on the morning of July 15 (yesterday), when the price of Bitcoin fell below $10,000, with the largest drop of more than 10% in 24 hours. Other digital currencies also experienced a "cliff-like" drop, with the largest drop reaching 20%, and investors were wailing.

What factors influence market sentiment?

The situation of digital currency is constantly changing "7 days × 24 hours". Before analyzing the factors of price increase and decrease, we need to make it clear that prices rise and fall, which are all normal phenomena. It is impossible for a token in the market to only rise and never fall. Ups and downs are the norm in the market, just like the ebb and flow of seawater in nature, which is normal. The market cannot be accurately predicted, but we can summarize the factors that affect market sentiment and drive price increases and decreases through rising and falling market conditions and actual conditions. In summary, the factors that affect market sentiment can be divided into the following aspects:

1. Policy factors: Looking at the milestone events of Bitcoin price rise or fall in recent years, policy factors can be said to be one of the most important factors affecting the price of digital currency. In 2013, the first round of Bitcoin bull market was triggered by Germany, Japan and other countries taking the lead in recognizing Bitcoin's function as a world currency. Bitcoin rose from 13 US dollars at the beginning of the year to 1,200 US dollars at the end of the year, a 90-fold increase; in 2017, the People's Bank of China and seven other ministries and commissions issued the "Notice on Preventing the Risks of Token Issuance and Financing", calling a halt to all domestic token financing projects, and shutting down token financing platforms and trading platforms. This incident directly caused the coin holders to panic and sell their tokens, and the industry entered a cold winter. Bitcoin fell to the freezing point, from 4,900 US dollars before 94, all the way down to 2,900 US dollars.

2. Investor demand factors: Investors' demand for digital currency will also affect the rise and fall of digital currency prices. When the real environment is not good and the financial situation is unstable, digital currency can play a role in avoiding the risk of legal currency depreciation. In this way, people's demand for digital currency will increase, which will in turn drive up the price of the currency. At present, the real environment in many countries in the world is very severe. Some countries are experiencing war, economic sanctions, or political unrest. The financial environment is quite unstable, which makes the citizens of these countries more inclined to invest in digital currency to avoid risks. For example, Iran, which is currently suffering from US economic sanctions, currently has an increasing demand for digital currency in Iran, and Bitcoin mining or investment enthusiasm is very high. Another realistic factor is that when investors are frustrated in the stock market and gold market, they will turn to new investment areas, such as digital currency, which will inject new investment power into digital currency, such as the entry of institutions and large investors.

3. Industry leader factors: The price of digital currency is also largely affected by industry leader companies or platforms, or digital currencies with higher market capitalization. Some actions of institutions or platforms with great influence in the market will affect the market trend. Take this year's bull market as an example. The starting point of this year's bull market is generally believed to be related to the IEO projects launched by first-tier trading platforms. And we can find a general trend by observing the "surge and plunge" of digital currencies in the past two months, that is: when Bitcoin rises, altcoins rise, and when Bitcoin falls, altcoins fall. This shows that the digital currency with the highest market capitalization (Bitcoin) has an impact on the entire digital currency market.

4. Emergency factors: hacker attacks, trading platform closures, and project owners running away. These emergencies will also affect the price of the currency.

What are the reasons for this round of Bitcoin plunge?

Above we have summarized the factors that influence the market conditions at a macro level. According to the above logic, it is easy to find the reasons for this round of Bitcoin plunge.

1. Policy factors: US President Trump published an article to criticize Bitcoin, and various US official agencies tend to suppress the digital currency industry.

Recently, due to the Facebook coin issuance incident, digital currency has become the focus of various US government agencies. On the 11th, US President Trump said on social media Twitter that Bitcoin and other cryptocurrencies are "not currencies". He also said that unregulated crypto assets will encourage illegal activities including drug trafficking. According to US media reports, the US Internal Revenue Service plans to update its guidance on cryptocurrencies in the coming weeks. US lawmakers are discussing a bill aimed at preventing US "large technology institutions" from issuing cryptocurrencies, prohibiting large technology institutions from establishing, maintaining or operating digital assets for use as exchanges, value storage or any other similar functions. The series of actions by US official agencies have been called the "American version of the September 4th Incident", and the firm regulatory attitude has had an adverse impact on the price of the currency.

2. Investment demand factors: The Federal Reserve cuts interest rates, investment models diversify, and investors face more investment options.

The Fed’s interest rate cut is a foregone conclusion. US President Trump has said more than once that the Fed will continue to cut interest rates. Interest rate cuts mean that the yield on bank deposits will be lower, and the currency will depreciate in disguise. Capital is profit-seeking. Investors who are unwilling to see currency depreciation will either use the low borrowing costs brought about by the interest rate cut to increase consumption; or they will look for new habitats and invest more actively in products with higher yields, such as stocks and gold. It can be said that the Fed’s interest rate cut is a booster for US economic growth and is good for the US stock market. In this way, given the current perfection of stock investment in terms of supervision, investors may tend to give priority to stock investment and abandon digital currencies, which have unclear regulatory attitudes and high market volatility.

3. Industry leader factors: Facebook Libra project is blocked and the progress of the project is gradually declining

Facebook is a social platform giant with more than 2.7 billion users. In June, Facebook released the white paper of the stablecoin Libra project (the project was described as being used for mobile payments), which was considered an important factor in the surge in Bitcoin in June. But good news can turn into bad news, just like the principle that too much joy leads to sorrow. Soon after Facebook issued its currency, it was "encircled and suppressed" by many countries led by the United States. Facebook's past scandals were exposed one by one, and members of the U.S. Congress continued to question the security and operation methods of Facebook. Regarding Facebook's currency issuance, the United States' attitude can be said to be very tough. Facebook must be carried out under supervision and must accept questioning and hearings from various relevant government agencies. Only in this way can it continue to promote subsequent projects.

US President Trump wrote on Twitter that Facebook Libra is unfounded or unreliable. For the cryptocurrency community, in the short term, Facebook's coin issuance seems to have become a false joy, and enthusiasm for digital currencies such as Bitcoin has also waned.

4. Unexpected events: Plustoken ran away, and investors were concerned about the speculative risks and security issues in the Bitcoin market.

There are rumors that Plus Token, the largest fund in the cryptocurrency circle, involves tens of billions of bitcoins. When Plustoken was "like a fish in water" in June, tens of billions of assets were locked up, and the amount of bitcoins circulating in the market decreased, causing the bitcoin price to rise rapidly. With the collapse of Plustoken, the tens of billions of locked assets were slowly released, which became the biggest negative for the market.

Is the bull market over?

The recent market fluctuations have caused panic among investors. Many people are questioning whether the bull market is over. I personally think it is not over. Why do I say that? Because this year is special. This year is 2019, and there is less than a year before the next Bitcoin halving in 2020. According to the judgment of the Bitcoin bull-bear cycle, it should still be in the early stage of the bull market. The plunge in the past two days should not affect the development of the subsequent market. In addition, judging from the current market, Bitcoin has ushered in a small upward trend, and other digital currencies have also risen accordingly. As of the time of posting, the OKEx Bitcoin spot price is around US$10,736.