Bitcoin first crossed $1,000 in November 2013. However, with the breakdown of the world’s largest bitcoin exchange – Mt. Gox, it slid to $211 by February 2015, an 80% loss of value. It spent the next two years recouping its losses.
Bitcoin began FY18, back to this landmark level, at $1,089. This is when the next great bitcoin bull market commenced. It crossed $2,000 by June 2017. In another two months, by August 2017, it had doubled again to $4,000. Three months afterwards, almost like clockwork, the currency doubled again to $8000 (in November 2017).
If by then you thought that bitcoin had gone far enough and it was time to sell, you would have missed the rally of a lifetime. In December 2017, the currency once again doubled itself. It crossed $15,000 by December 10th and hit its all-time peak of $19,783 the very next day, December 11th.
Since then a host of circumstances have driven bitcoin steadily lower. South Korean tax authorities clamped down on exchanges in South Korea, a major bitcoin market in January 2018. A month later, the US Securities and Exchange Commission (SEC) also acted against unlicensed exchanges. In India, income tax surveys in December 2017 were followed by several banks imposing restrictions on the accounts of cryptocurrency exchange and halting the use of their cards for bitcoin transactions. The Registrar of Companies (RoC) also stopped accepting the registration of further bitcoin exchanges.
Bitcoin has also been subject to large thefts of coins from exchanges and private owners and price manipulation. Its latest fall has been triggered by a concern that prices have been manipulated by a bitcoin exchange called ‘Bitfinex.’ It has also lost some ground to other cryptocurrencies like Ripple which have found more acceptance among banks.
Bitcoin may have been a victim of its own success. The currency may be down 65% from the peak but it is still up 600% for FY18 beating even the hardest charging mutual fund at 39%. The Government of India has not banned bitcoin, indicating instead that it will be regulated as an asset. A finance ministry committee to frame regulations on the subject is still at work. Globally countries such as Japan and Russia have taken a relaxed attitude towards cryptocurrencies. Many countries and institutions are also enthusiastic about blockchain, the technology that underpins bitcoin.
Given a host of factors that can influence bitcoin, it is impossible to make an estimate of its future trajectory. Companies such as Unocoin have launched SIPs or Systematic Investment Plans in the cryptocurrency. An SIP invests a fixed amount in an asset (in this case, bitcoin) each month thereby averaging out the purchase price and protecting investors from catching a market high. However, this too may not be enough to protect you from wild price swings.
If you are in any way risk-averse, do not buy this cryptocurrency. It has a long way to go, both up and down.