Bitcoin Recovers From Pre-Christmas Selloff – Is The Panic Over?

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Bitcoin investors were in shock last week after the currency lost over 30% of its value, but the most popular virtual currency in the world is gaining steam again. The crypto-currency had surged over 10% from last week’s low, when it dropped below the $12,000 mark. Tuesday morning it was trading at over $15,000 on the Bitstamp exchange in Luxembourg.

Bubble burst or an opportunity for Bitcoin investors

Year to date, the currency has surged over twenty times from a little under $1000 to as high as $19,666 on Dec. 17 on Bitstamp, and over $20,000 on other exchanges. Bitcoin investors and enthusiasts believe that the drop last week was the much-awaited correction after the meteoric surge. At one point last week (its worst week since 2013), the currency fell as low as $11,159.93.

“Taking profit is right, while buying into a long-term projection is also right. You don’t have to be right in this market, just less wrong than the rest,” said Andrei Popescu, Singapore-based co-founder of COSS, a platform that includes all features of a digital economy based on cryptocurrency, according to Reuters.

Talking of the drop last week, Julian Hosp, founder and president of TenX, stated that the industry insiders were expecting the fall given the dangerous levels that the currency scaled over the past few months. He, however, believes that the correction was normal and a healthy opportunity to accumulate the currency at lower levels. Hosp is confident that Bitcoin will drop again, but not right now.

“I don’t think right now, but I think in the long run, we will always see a little bit of an up move, and then a dip down,” Hosp told CNBC’s “Squawk Box.” TenX makes it easier for people to spend digital currencies.

On the other hand, there are many who are warning investors about the Bitcoin bubble. Israel Securities Authority (ISA) chairman Shmuel Hauser plans to table a regulation to ban companies based on Bitcoin and other digital currencies from trading on the Tel Aviv Stock Exchange. Hauser notes that if a company has its main business in digital currencies, then they would not be allowed, and if listed already they would be suspended, notes Reuters.

Where to from here?

An uncertain regulatory environment is a major cause of such swings in the Bitcoin’s price. While the CME Group and CBOE Global Markets exchanges announced future instruments for Bitcoin on their platforms, the United States Securities and Exchange recently alarmed investors stating that there is “substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation.”

Even though Bitcoin has regained some of its lost value, whether investors have regained the lost confidence in the currency is yet to be seen. There are also chances that the extreme volatility last week may act as an invitation to aggressive speculators, who are ready to bet on the big spikes and dips for making quick money.

Bitcoin is currently at the crossroads. The crypto currency has survived its first major crash, and it is a positive sign for the investors. On the other hand, energy consumption and transaction fees surrounding the currency are increasing. In addition, the volatility has forced many online retailers to stop accepting Bitcoin, undermining its usefulness as a currency.

So, it remains to be seen, how this digital currency fares from here, and the next few weeks will be very crucial in determining its path.

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