In a recent article on the topic of trading with virtual money, I noted that some traders are saying that the downfall of the digital currency, called in laymen’s terms “Bitcoin”, is a sign of its demise. However, there are some people that say this is just the first step to the end of trading digital currencies. Is there a reason why the price dropped so dramatically and what comes next? This article will discuss 3 reasons why the price was rejected at $11,500 and what comes next for the future.
First and foremost, the loss of confidence in the exchange is the main reason why it dropped so dramatically. People are afraid that they may not get their money back or even be refunded, which is obviously not the situation.
This is a big issue to everyone. Even though a person’s investment is being traded on an international level, it is still a private matter between the person trading and their bank. The bank that trades the currencies is basically acting like the middleman. It doesn’t matter how much money a person has in the bank; if they don’t have faith that their money will be returned, then they are likely not going to trade at all.
This is one of the major problems with trading in virtual currencies. There is no central authority, such as a government or central bank, to regulate the price. This leaves it up to the individual trader, which is where all the greed comes in. Most traders will do anything possible to make sure that they can get their money back. Therefore, they will buy up a large number of coins and then attempt to sell them in order to recoup the cost of the transaction.
As previously stated, however, there are some traders who are greedy enough to believe that this will work. As a result, when the price falls, the seller is only interested in getting his money back. This is a very good way to make a profit. Unfortunately, many times it does not work out that way and the prices fall even further.
The next thing comes from the perspective of those traders that believe in the future of this market. Those traders understand that this is not the end of trading in virtual money. Many analysts believe that the next step will be that the virtual currency will be backed up by a major financial institution. This would cause the price to go back up. In the mean time, those who think the world is headed towards a more traditional currency may make their move and make some big money.