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article imageOp-Ed: Bitcoin surges to record $11,388 then drops well over $10,000

By Ken Hanly     Nov 29, 2017 in Technology
After reaching a record high of $11,388 the price fell back back below a thousand during trading on Wednesday. Demand was so strong the exchanges had trouble handling the traffic. The price was quite volatile,
According to a CNBC article, the price of bitcoin dropped 18 percent from a record high of $11,388.33 to levels when the article was written -a few hours before I am writing this- around $9,292. As I write this on Wednesday evening, the price is already back up over $10,000. The price is rising by the minute and is already at $10,274 already up over 4 percent from its opening.
Leigh Drogen, who heads Estimize, a 6-year-old company that collects and publishes estimates for data such as earnings said that there was no fundamental to any of the cryptocurrencies that their value or price is a function of supply and demand at any given point in time.
Huge bitcoin trading volume causes problems for exchanges
Over a recent 24 hours trading period, volume in bitcoin was a whopping $9.75 billion.
Coinbase reported that services were not available for some customers on Wednesday. Its GDAX exchange reported that it had "performance issues and downtime in the afternoon" on Wednesday but later in the afternoon claimed to have resolved the issues.
A new naysayer
There have been a number of prominent critics of bitcoin including Jamie Dimon CEO of JP Morgan Stanley who compares bitcoin to a Ponzi scheme and calls those who buy it stupid.
Joseph Stiglitz, who formerly was the chief economist for the World Bank goes further than Dimon and claims that bitcoin should be banned. Stiglitz is a professor at present at Columbia University. In an interview with Bloomberg TV Stiglitz said: "Bitcoin is successful only because of its potential for circumvention, lack of oversight. So it seems to me it ought to be outlawed. It doesn’t serve any socially useful function." However supporters would no doubt claim that it does serve a useful function. It allows financial transactions between people without the intervention of a third party such as banks. It also ensures privacy and security of the transaction.
Stiglitz does support digital money but only if it is fiat created and controlled by the government, exactly features that bitcoin was designed to avoid. Stiglitz said: "Let’s move away from paper into the 21st century of a digital economy." Supporters of bitcoin might say lets move beyond the banks and fiat money in the new digital economy.
Moves so far appear more a correction than the bubble bursting
Jonathan Krinsky, the chief market technician at MKM Partners said: "It's definitely been going a bit parabolic over the past few weeks. I think today's action marks somewhat of an inflection point. But it's still 200 percent above its 200-day moving average, so it's not surprising to see some consolidation here."
It took less than a week for bitcoin to go from breaking the $8,000 level to breaking above $9,000 as described in a recent Digital Journal article. By Tuesday evening this week it had breached $10,000.
Although the drop in price was quite sudden and quite large, it is hardly surprising given the speed with which it rose. No doubt many were selling to turn some of their paper profits into cold cash.
What is next for bitcoin?
According to a recent article tracing the history of the price of bitcoin some experts claim that the price of bitcoin could go as high as $130,000. Unlike fiat money issued by governments the number of bitcoins that can be mined is limited. This means that more bitcoins cannot be issued simply to satisfy an increasing demand.
Others, such as Warren Buffet the investor claim that bitcoin will become worthless.
Drogen said that the bitcoin market was problematic for traders: "This isn't going to end. There's not enough liquidity from the market making to handle big-size [trading] when stuff gets loose like this. It's not going to end. This is one of the most difficult markets to trade because of the volatility. Everything is sped up by 10 times."
Analysts point out that it appears there are not many long-term sellers of bitcoin right now.
Richard Sluymer, a technical strategist for Fundsrat, said in an email to CNBC: "High volume, high volatility intra-day reversals like today, following strong upside surges, are generally viewed as technical warning shots of a potential trend shift. In my opinion, BTC has had a very strong surge and both investors and traders should not be surprised to see a correction/retracement develop."
Sluymer said there was support for bitcoin around $8,500 to $9,000 and then at $7,500. He said it would be difficult for bitcoin to surpass $10,200 in the near term. As I write, this bitcoin already surpassed that level.
While it is not clear what is next for bitcoin the recent precipitous drop looks to have been a correction rather than a sign that the bubble is bursting. Of course by the time you read this the price may be dropping like a stone again.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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