Bitcoin's fall temporary, say experts

Despite the sudden sell-off, bitcoin has still accounted for a trading volume of $101.27 billion in the past 24 hours with the market cap still above $1.06 trillion - Sumit Gupta, Co-founder & CEO, CoinDCX

Mumbai: Bitcoin nose-dived to three-week low early Sunday. The biggest cryptocurrency by market value dropped to $52,148 from $60,000 in just 15 minutes.

To be precise, the biggest crypto coin fell 10.1 per cent to $54,743.57 as of 7:30 a.m. in New York on Sunday, after declining as much as 15.1 per cent to $51,707.51 in the Asian day. The plunge was due to speculation that the US Treasury may crack down on money laundering that's carried out through digital assets.

Commenting on it, Sumit Gupta, Co-founder & CEO, CoinDCX said, "We believe this is a temporary phase and prices will recover soon as the Treasury has already refuted the rumours. Another probable reason could also be the massive power outage in China's Xinjiang region, which is one of the largest mining pools which may have prompted the sell-off."

However what needs to be noticed is that despite the sudden sell-off, bitcoin has still accounted for a trading volume of $101.27 billion in the past 24 hours with the market cap still above $1.06 trillion which clearly showcases investor confidence and bitcoin's mainstream acceptance as an asset class, he added. A section of experts are of the view that bitcoin is not a good medium of exchange. It is despite the fact that Elon Musk says he will take it for Tesla.

Citing the reason behind it, they say that it's very hard to do transactions because you can only do nine transactions per second while Visa and Mastercard can do hundreds of thousands. Plus, when the value changes 60/70 per cent every other day, how can you take it as a unit of account? they ask.

Sharing his view on the development Sathvik Vishwanath, CEO & CO-Founder of Unocoin says, "At the present point of time, we are doing less than two transactions per second on the main bitcoin blockchain. So there is still enough room for new transactions to squeeze in."

The number of transactions is a pure engineering problem and there are already layer 2 solutions ready for the same. This is like assuming video streaming would never be possible looking at the speed of dial-up modems. Bitcoin as we know is still in its value discovery stage and hence it is volatile. However, the volatility nowadays ranges between 2-10 per cent and definitely not as bad as the days up to 2015 where it used to change by up to 50 per cent in a single day.

According to Vishwanath, "As time progresses, the volatility continues to reduce on average making it more feasible for doing exchange-based transactions. On the other side, it is also true that bitcoin is establishing itself as the asset class while we see transaction friendly coins or tokens to emerge using similar blockchain technology."