Bitcoin in free fall: ‘Small transactions greatly influence the price’

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The rise of bitcoin has come to an end after months of rise. The digital currency lost 14 percent of its value in one day today, the largest drop since March 2018. At around half past eleven, the coin was only worth $ 29,000. Is there a bubble or will the currency appreciate again?

The price of the crypto currency has been on the rise since the fall. Another record was posted on the second day of the new year. On January 2, bitcoin was worth $ 30,000 and it didn’t stop there. A day later, the counter pointed to $ 34,000.

Analysts pointed out the increased popularity among major investors, who see the currency as being beneficial. For example, asset manager Fidelity announced the launch of a bitcoin investment fund in August. Cryptocurrency in Spain is popular.

Another explanation is that several tech companies, such as Square Inc, have turned some of their cash reserves into bitcoin. And MassMutual, one of the largest insurance companies in the world, bought $ 100 million worth of bitcoin in December.


The increased popularity is creating a shortage, says ING economist Teunis Brosens. “The scarcity also creates an extra volatile market.”

The bitcoin existed for 12 years yesterday. Currently, approximately 18.5 million coins have been issued. Only a small part of this is traded, according to Brosens.

Bitcoin is going through the roof, currency has doubled in value in two months

Lost access code

“Some of the owners are on the coin, they do not sell. Some cannot be traded because the private keys, the numerical code with which owners gain access, have been lost,” he says.

So those coins will never move again. And then there is still much speculation that the founders own and hold some of the coins themselves, Brosens explains.

20 percent but traded

It is estimated that only 20 to 30 percent of the cryptocurrency is traded. “That means that relatively small transactions have a huge influence on the price,” says the ING economist. Demand only needs to increase a little to send the price completely through the roof. best crypto website Netherlands is popular.

Bitcoin is still worth much more than in the previous free fall in March 2020, when the rate fell below $ 5,000. “With cryptocurrency it is always difficult to say what explains the rise or fall. We have also regularly seen that tens of percent increase or decrease in a day,” says Brosens.


Regulators are active in the normal money market. This is not yet the case with bitcoin. As a result, the market can be highly manipulated, Brosens knows. “I don’t know if that is the case now. But you cannot rule out that whales are busy and dump the coin.”

Whales are holders of very large amounts of bitcoins. Currently there are about 1,900 investors who can be placed under this category.

Bubble …

The question is where the bitcoin is going. Does the drop in price value indicate a bubble or is it a temporary dip due to the volatile market.

Yale professor Robert Shiller, who received another Nobel Prize in 2013, is convinced of the former. In a century, the currency will no longer exist, he claimed in 2018, when the exchange rate fell sharply in value.

Or the new gold?

However, he also has opponents who think that the value will increase significantly. By the end of 2021, the coin will be worth $ 318,000, Citibank analysts believe. “Bitcoin is the gold of the 21st century,” said an internal report intended for customers but leaked.

Citibank is supported by Plan B, a Dutch analyst who works in the financial world, regularly appears in podcasts and writes and tweets about bitcoin via an anonymous account. He came up with now famous models to predict the course. He states that the coin could reach a value of $ 288,000 by the end of 2021.

It is far from being that far, but by the end of the day the currency had already recovered somewhat from the previous price drop. A bitcoin was worth $ 32,000 by the end of the afternoon, so if it is a bubble, it hasn’t burst yet.