Bitcoin’s Make or Break Moment for Investors

Interest in bitcoin is fading fast – at least for now. The first virtual currency plunged more than $1,200 on Wednesday to its lowest level in a month as a combination of regulatory risks and business censorship curbed investor appetite.

Bitcoin Falls Below $8,000

The value of bitcoin touched a session low of $7,946 on Wednesday, marking its first break below $8,000 since early February. In just 24 hours, the cryptocurrency has declined more than 13% and now sits at $8,055.

Such a rapid decline has pushed bitcoin to the brink of oversold levels, according to the daily Relative Strength Index (RSI).

At current values, the bitcoin market is capitalized at roughly $139 billion, based on the most recent data provided by CoinMarketCap.

Despite the pullback, bitcoin and other major cryptocurrencies remain well off last month’s lows. The market has shown considerable poise since bottoming at $276 billion on Feb. 6, but as the latest breakdown demonstrates, considerable headwinds persist.

At the time of writing, the total crypto market was valued at $326 billion, where it was not far off the session low. Volumes have also weakened to about $15.4 billion over the previous 24 hours.

Fading interest in the market has allowed the bitcoin dominance index to strengthen to 42.3%. This basically says that 42.3% of the crypto market cap is made up of bitcoin. This same index bottomed at around 32% in January when speculation in alternative coins was at an all-time high.

Changing Fundamentals?

Bitcoin’s most recent breakdown has triggered a tidal wave of emotions for long-term backers of the digital asset. That’s because, unlike previous breakdowns, recent price action has been stoked by significant changes in the market.

For starters, Google recently announced it would follow Facebook’s lead in banning all forms of crypto- and ICO-based advertising. Anyone involved in advertising, search engine optimization and e-commerce knows that Google can make or break any marketing campaign. In fact, businesses have routinely adjusted their SEO campaigns and writing styles just to meet Google’s ever-changing standards.

Without Google advertising, blockchain-based companies such as exchanges, ICOs and others may face greater challenges marketing their products and services. At the same time, however, this new phenomenon could place more emphasis on organic marketing and creative content. In this environment, it would be sensible to expect more emphasis on blogging, social media communities and direct advertising on crypto-specific sites.

In addition to the recent Google announcement, regulators in the United States and Japan are stepping up their efforts to better understand the cryptocurrency market and safeguard investors from harm.

At present, the United States is focusing on ICOs, with the Securities and Exchange Commission (SEC) recently warning exchanges about so-called security tokens (basically, if an exchange offers these tokens, they must register with the agency).

Meanwhile, the Japanese are increasing their surveillance of domestic exchanges for signs of security vulnerabilities. Last week, the country’s Financial Services Agency (FSA) penalized seven exchanges after judging their internal controls ill prepared to deal with a cyber attack.

Make or Break Moment for Investors?

This could be a make-or-break moment for many in the crypto community who are concerned about bitcoin’s current trajectory. If you believe in the Bitcoin Misery Index, there’s perhaps no better time to buy than the present. Those who believe a fundamental shift in the market may be underway will feel much more apprehensive about what BMI currently says.

Regardless of which side of the debate you stand, it’s reasonable to expect an indefinite lull period for the digital asset class. In fact, some may argue we’ve been experiencing one for the past four weeks. A quick analysis of  Google search trends seems to corroborate this view.

Google searches for “bitcoin” reached peak popularity in December, but has since fallen to a fraction of its all-time high. Since peaking, bitcoin’s online searches have plunged 82%, according to data captured by Google Trends.  The following chart illustrates bitcoin’s popularity over time, based on Google search terms.

Source: Google Trends.

On the scale of 1 to 100, the latter represents peak popularity, which bitcoin reached in December. Since then, the coin’s value has dropped to 18.

The blue line in the chart represents Ethereum, the world’s no. 2 digital asset based on market cap. Ethereum peaked at 10 in December and then again in January, but has since fallen to 2.

Bitcoin’s average search score over the past 12 months is 26, while Ethereum clocks in at 4.

Although it may be easy to label bitcoin a “fad” that’s dying fast, the cryptocurrency’s obituary has been written numerous times in the past. If you think this is bad, go back and read what the pundits wrote about bitcoin following the implosion of Mt Gox back in 2014.

Unlike 2014, bitcoin is today a household name, trades on the biggest futures markets and can be accessed by tens of millions of traders worldwide. Coinbase alone boasts more than 20 million customers and it isn’t even the biggest exchange when it comes to daily volume (bitcoin or otherwise).

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi