Has Bitcoin Bottomed Out?

The rapid ascent and subsequent crash in bitcoin’s price in recent times has left investors in a tizzy. Some claim that the market is in correction mode. Others that the bubble has burst. (See also: 5 Reasons Why Bitcoin Is Still In A Bull Market). 

The Wall Street Journal last week published a report conjecturing that bitcoin had hit rock bottom. The publication cites an array of statistics to prove its point. For example, the downward slide of bitcoin’s transaction volume indicates that its trading activity has dropped. 

Curiosity about the cryptocurrency, as indicated by Google Search trends, has also waned as its price declined. About the only thing that has remained constant is the ever-growing list of scandals associated with bitcoin. 

Governments and regulatory agencies regularly use them as examples to cast bitcoin as a criminal actor in the financial system. All of this has had a detrimental effect on bitcoin’s price. And some are predicting lower lows. “The problem with that is that the low – when it comes will be debilitatingly low,” says Peter Atwater, adjunct professor at The College of William and Mary. “No one will want to touch it.”

Will Bitcoin Crash Further? 

When the WSJ piece was published, bitcoin’s price levels were close to $6,000 and were threatening to decline further. Since then, it has rallied. At 15:05 UTC, bitcoin was changing hands at $8,036. 

There is an element of schadenfreude in predicting a decline in bitcoin’s price. After all, media coverage of the cryptocurrency has mostly focused on its sensational aspects. These include the vocal crypto-enthusiasts who make up its community, the hacks and the cryptocurrency's scandals, which have intermittently propelled its rise and decline. 

While they have a point in expressing incredulity at its price rise, bitcoin critics should also push back the curtain to investigate developments. Those developments may provide the basis for a sustained rally in bitcoin by the end of this year. 

Even as its price has declined, bitcoin’s technology has made significant strides in the last couple of months. Lightning network, which envisages offline channels to speed up transactions on bitcoin’s main blockchain, is beginning to proliferate across its network. Major exchanges have begun implementing Segregated Witness, another technology improvement to speed up bitcoin’s network. (See also: Bitcoin's Pizza Guy Repeats The Trick With Lightning Network).  

These developments are complemented by a clean-up of the cryptocurrency ecosystem. For example, exchanges are moving towards self-regulation to attract more mainstream investors. Governments around the world are looking into the possibility of regulation for cryptos, starting with bitcoin. In the United States, bitcoin derivatives may be on the agenda after the Chicago Board Options Exchange nudged the CFTC in their direction. Derivatives, such as ETFs, will bring in more mainstream and, more importantly, institutional investors into the bitcoin ecosystem and tamp down its volatile price swings. Wall Street advisor Tom Lee, a Fundstrat analyst, has predicted a bullish price target of $25,000 for bitcoin by the end end of this year. On a near-term basis, he has predicted a price of $20,000 for the cryptocurrency by June. 

Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns 0.1 bitcoin. 

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.