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Has the bubble burst or is it a January sale?

This week has seen a drastic pullback in the Cryptocurrency market with the ‘big boys’ of Ripple, Ethereum and Litecoin plummeting, with Bitcoin falling over 50% from its value just a few weeks ago.

The fall began when South Korea’s most senior financial politician said that the country was going to introduce stringent new regulations and could possibly look to ban trading outright. This was followed by a similar statement from China. This news sent Bitcoin & co. spiralling downwards out a rapid rate which Bitcoin plunging below the $10,000 mark, amid fears that the high prices of recent times had finally come to an end and the ‘bubble’ was burst.

Last year will be known as the year of Bitcoin in the trading world. Bitcoin and Cryptocurrency really came to the fore with its blockchain software and technology and how it has the potential to change the world as we know it today. However, as Bitcoin and other coins started to receive more and more attention for this, the value of them rose as well and what happened was nothing short of pandemonium. News stories broke on people who had invested a couple of hundred dollars and became multi millionaires and all of a sudden everyone wanted a slice of the action.

This led to a frenzy of new investors, with the level of demand so high that the exchange platform Binance was reported to be receiving circa 200,000 new account applications EVERY DAY. However, this new wave of investors were, on the whole, investing due to FOMO (Fear of missing out) and were staking money on all sorts of coins as they seeked the next big thing. This led to lesser known coins producing returns running comfortably over 1,000%.

Then came the drop….

The new wave of investors panicked and sold whilst the experienced investors who invested in coins for their capabilities held on for dear life (HODL-google it!) and even bought some more as it was viewed as a buying opportunity. Warren Buffet, the most famous investor of all time, has a famous phrase that has rarely been more relevant; ‘Be fearful when others are greedy, be greedy when others are fearful’.

There has been a pattern emerging of which 2018 appears to be no different. In January of each month the price of cryptocurrencies drop drastically before recovering again which indicate this dip is nothing long term.

Moving forwards, our thoughts are that this is not a sign of a crash or bubble bursting, this is simply a short term pullback which has created some potential opportunities for great long term gains. Therefore, we recommend spending some time to understand the software and capabilities of coins that you are looking to invest in and look for a time horizon of long term gains rather than making the so called quick buck. Finally, it almost goes without saying but only invest what you can afford to lose.

Happy trading!


Mat Clarke


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