After hanging out near the $10,000 level for a while and testing investors’ patience, Bitcoin (BTC-USD) has made headlines once again—but not in a good way. Don’t get the wrong impression. 2019 has been a bullish year for Bitcoin overall, but the recent price decline has shaken the cryptocurrency community to the core. And it’s also brought social-media crypto critics out of hibernation.
On September 24, Bitcoin dropped from $9,352.89 all the way down to the $7,800 level within an hour. Within a day or two, it stabilized at around $8,400. But the decline was swift and scary enough to leave investors wondering whether more pain lies ahead. And, just as importantly, they’re wondering what caused the sudden bear raid.
Much pain, little gain
Observers have said that Bitcoin is the mother ship of cryptocurrencies because wherever it goes, other digital coins are likely to follow. This has historically been true, and it has certainly been the case during this rout. Ethereum has broken below the $175 level while Ripple has fallen below 25 cents.
These crypto prices have made it much more difficult for ultra-bullish commentators to achieve their price objectives for Bitcoin. For example, Dan Morehead, the CEO of Pantera Capital, had asserted that there’s a “good shot” that Bitcoin would reach $42,000 in 2019. Meanwhile, Anthony Pompliano of Morgan Creek Digital projected that by the end of 2021, Bitcoin would be at least $100,000.
Those price target are still attainable. But the recent price slump has dampened enthusiasm and prompted some cryptocurrency holders to question their investment. Bitcoin breached pain points alongside other virtual tokens as they broke down with no warning. To quote Messari product director Qiao Wangto, “Even for Bitcoin, this is a pretty rare event.”
Adding insult to injury was the seeming lack of any identifiable catalyst. There was no regulatory SNAFU, no cryptocurrency exchange hacking or theft. Nothing to prompt this price decline. In hindsight, then, what could possibly have caused this rout?
The big Bakkt yawn
A postmortem on this horrific event seems to point not to something that happened but to something that didn’t happen. The long-delayed, highly anticipated launch of Bakkt turned out to be a major disappointment.
Bakkt comes from the parent company of the New York Stock Exchange. It was designed to enable institutional investors to trade cash-settled Bitcoin futures. Bakkt was supposed to represent a quantum leap forward for not only Bitcoin but also the blockchain and cryptocurrency space generally.
The Bakkt launch faced multiple delays. But they only allowed the anticipation to build. And you’ve probably heard the old financial-market saying: “Buy the rumor; sell the news.” The adage means that asset prices tend to fall after a highly anticipated event passes and investors realize the event may have been over-hyped.
The broader implications, and Bitcoin’s future
It’s hard to argue with that sense of disappointment. Only 71 bitcoins traded during Bakkt’s entire first day. Celsius Network CEO Alex Mashinsky deduced from the anemic trading volume that “institutions are less ready to invest in BTC at scale than was supposed.” He added that “the price was probably too high and due for a correction.”
Whether the Bakkt disappointment actually signals a lack of institutional interest in trading cryptocurrency is debatable. And not everybody concurs with Mashinsky’s assessment that Bitcoin was “probably too high” or “due for a correction.” If anything, I feel that it’s more of a reflection on Bakkt than on Bitcoin or blockchain technology. And I’m quite confident that the Bitcoin price is perfectly capable of reclaiming $10,000.
Besides, we can’t dispute the math. Bitcoin is still up in 2019, invalidating last year’s dramatic bear market. We have yet to see whether the current price action indicates a new bear market. But I still see Bitcoin’s future as promising, Bakkt or no Bakkt.