More Bitcoin Bouncing

I hadn’t planned a follow-up article on Bitcoin valuations quite so fast given that I just put out an article on the subject last week.

Interestingly enough, the current Bitcoin valuation is also relatively close to where it was as of the writing of that last article, but in that article, I concluded:

The only thing that we can absolutely count on in the meantime is continued fluctuation in the market. In the meantime, I make no claims as to whether I think Bitcoin will be up or down at the end of the year compared to the present number. I would definitely wager that, at any point in the year, it will drop below $2,000 again at some point.

Granted, it was a pretty easy call to make; I just didn’t think it would be proven right quite so quickly. Within a week of this writing, Bitcoin has both fluctuated wildly and dropped down below $2,000. As a matter of fact, just earlier today it hit $1,974.30 but is already back up to $2,157.03.

It almost makes me wonder if there are a few major players in the market shorting this currency and making money over and over again on what are effectively the same Bitcoins.

Hold on...it just went up another seven bucks in the last ten seconds…

There are those who think that Bitcoin will continue to fluctuate wildly, but in terms of month-over-month are holding it expecting a long-term upward trajectory. On the other hand, there are those that think that Bitcoin is a bubble that is due to burst sooner or later.

The all-time high for Bitcoin discussed in the previous article? That’s not even close to the current all time high which is now roughly $2,766 (close) hit just two days ago as of the time of this writing.

Wait, two days ago?

That’s absolutely right. Bitcoin had lost as much as 28.634% of its value just to recover to 77.98% of its current all-time high in the period of just a few days. I don’t know what the market movers are, but someone is making some serious money on this...and I don’t mean more Bitcoin.

Fortunately, we have CoinDesk to make sense of it all.

Actually, it turns out that they don’t know, either.

They say that some Bitcoin experts believe that the sharp short-term price increases are going to create a bubble that is due to burst in the next few days. Although, I would take that with a grain of salt because it is easy to believe that those same experts are playing the market. Easier yet to believe is that those same experts tout a long-term increase to BTC prices, and then after that happens, revert back to claiming that there might be a price bubble about to pop.

Alternatively, CoinDesk seems also to suggest that there is a growing awareness of Bitcoin amongst traditional investors who are now getting into the game. Whether there are more major traditional investors becoming involved or not, there is no question that new people are entering the Bitcoin market as compared to just a couple of weeks ago.

Having scanned through many forums, both gambling and investing, there seems to be a huge trend in people wanting to figure out how to invest in, or alternatively mine, Bitcoin. In other words, there might be enough new interest in the cryptocurrency to continue to prop up prices (even if there would otherwise be a bubble) for the near future that we won’t see the price dip too far below $2,000. And, if it does, it might not dip seriously below that number for too long.

This is like the NYSE on steroids. You have professionals and talented investors who buy in when there is an actual fundamental reason to believe that there is a solid mathematical value in buying. In the meantime, you have some people who are buying in based on the perception of value in the market.

Many people look at these valuations, particularly the drastic increases, and think for sure that they can just ride a short-term wave and get out of the market at an opportune time. They believe that the wave will go back down after they sell, and then they will get back in locking up profits during each cycle all the while.

Maybe that is possible, if there is anybody who can read the wild fluctuations better than I can, then more power to you! However, I also recognize that it is possible to pretty easily (especially if you have a large store of Bitcoin and cash) to temporarily pump up the price of Bitcoin by making a major buy only to sell it at an even greater amount. In other words, some of the price gains might be completely manufactured. You start the trend, wait for other people to continue it, and then sell when you think you’ve hit the top of the wave.

Depending on how much money you have, that might be the thing for you. Furthermore, you don’t necessarily need to acquire entire units of Bitcoin at one time, so you can play the kind of a micro-game with it...though your individual contribution will not be enough to influence prices directly.

It is unlikely that many people reading this can make the sort of acquisition of BTC that would directly influence the market, but the sheer volatility and potential for a huge gain are exciting. I certainly wouldn’t mind making a couple hundred bucks on one BTC in a day and a half!

Some of you might want to get BTC for the long haul. As I stated in the previous article, I think Bitcoin will finish higher at the end of the year than it is right now, but how much higher I cannot say. It is becoming a growing trend to use it for retail purchases, which was its original purpose, to begin with. Furthermore, it is also an essentially untraceable form of currency which makes it ideal for some shadier type transactions.

I don’t know how much higher it will be than the current price by year’s end, but that is my prediction. Furthermore, I wouldn’t put your bottom dollar on it. If this is the effect of some sort of price bubble, then when that bubble does burst, prices will nosedive in a hurry and will take a very long time to recover, if indeed they ever do.

Look at all the banks and real estate companies that went under during the Great Recession as a result of the housing bubble: This isn’t even comparable to that. With that, you had a bunch of companies traded on various stock exchanges, some survived and recovered their value while some went under. Bank of America, for example, isn’t even worth half of what it was at its all-time high back in 2006, but it is worth more than seven times more than its all-time low.

If there is a crash, I have no idea what the recovery period would look like or if BTC would ever truly recover. My advice is just to expect continued huge fluctuations and know that, while every investment is a gamble to some degree, this is more gamble than investment for small players in the market.