Why Bitcoin price crashed

There has been much speculation on why the Price of Bitcoin crashed. This has been primarily due to Chinese Bitcoin investors becoming concerned that the government is going to crackdown on Bitcoin. The price had reached $1150, almost touching the all time high of $1200, only to fall back to $800 within a week.

The Chinese regulators had a meeting with the owners of the biggest Chinese Bitcoin exchanges, including BTCC, Houbi, and OKCoin. This caused concerns that this would cause problems with outflows, although the Chinese Exchanges denied the rumours. It has been mainly investor concern, and FUD being spread among various sources, because they have not been accused of any crime or illegal activities in china, but this may be careful work by unseen forces to try and manipulate the price, potentially keeping it suppressed.

The panic selling probably did not help matters in this regard, and hint of the price falling would have caused people to panic sell. This is also compounded with the onsite inspection of the major Chinese exchanges. Bitcoin is still a solid investment, although it is unlikely to become much more than a store of wealth if Bitcoin does not solve the Block Size problem, which has undoubtedly contributed to the problem

This is due to an increase in user adoption, while the community remains stagnant, and the 1MB blocks are always full these days, meaning you must pay a high fee to push your transaction through, unlike Litecoin, with lower fees, adoption of scaling fixes such as Segregated Witness, and a less busy blockchain.

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Unless the Bitcoin community fixes the scaling issue, it is likely the issue of the block size is going to surpress prices, as at the height of the january 2017 price peak, the mempool size was much larger than the block size. There is a risk of the blockchain stalling once adoption increases past a certain level, as no one’s transactions will be able to get through without paying an absurdly high fee.

We will update as more information on this subject becomes available.

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