The “Santa Claus Rally” that Bitcoin investors longed for throughout the year came to an end a little sooner than expected on the Friday before Christmas after the controversial cryptocurrency ended up losing almost a third of its incredible $20,000 value. The vertiginous drop from $19,500 all the way down to $11,000 prompted various exchanges to halt trading.
Traders were cashing in at heavy volumes that proved to be too hectic for Coinbase, the most respected cryptocurrency exchange, which was forced to stop accepting transactions in the midst of the massive sell-off. Earlier in December, the currency exchange rate of Bitcoin reached an all-time high of $20,000; however, that may have been the end of its Santa Claus rally about 10 days before Christmas. On Wall Street, traders at the New York Stock Exchange took a break from their own stock rally to check their news feeds and follow the Bitcoin carnage, which eventually recovered to $12,000.
An Uncertain Future for Bitcoin
Bitcoin had not suffered such a severe drop since 2013. Analysts interviewed by the BBC and the Washington Post explained that many traders rushed to convert their positions to dollars or other fiat currencies when Bitcoin hit $20,000 and started to lose value by the hundreds and later by the thousands. Financial regulators from around the world have been urging investors to exercise caution; notwithstanding these recommendations, Bitcoin futures started trading in Chicago in mid-December, and some analysts believe that this development may have prompted the sell off on Friday since many institutional investors had planned on shorting the cryptocurrency.
The Chicago Mercantile Exchange and the Chicago Board Options Exchange also stopped trading Bitcoin futures shortly after Coinbase had done so. A bearish sentiment was felt across the Bitcoin trading landscape heading into the weekend before Christmas, and news about Goldman Sachs planning on operating a cryptocurrency trading desk did little to assuage fears among investors.
Volatility aside, Bitcoin has gone through major growing pains since it started circulating in 2009. This was the digital currency of choice for buyers and sellers of the controversial Silk Road marketplace, which operated on the Dark Web until it was shot down by federal law enforcement agents a few years ago. In South Korea, a Bitcoin investment firm and cryptocurrency exchange was forced into bankruptcy after suffering two major hacks that cost them to lose hundreds of thousands of dollars.