The most valuable digital investment commodity in the world has been recently going through hard times. On May 19, the cryptocurrency markets lost more than a trillion dollars worth of market capitalization, and the volatile rebounds have been timid at best. To be sure, the markets were overpriced overvalued, and over-hyped, but there are other underlying issues that investors should be aware of.
The first issue at hand is the price drop caused by the collapse in the value of Bitcoin Core and Bitcoin Cash. When we consult the history books and look back at the first seven months of 2017, Bitcoin Cash was trading at around a $12 to $16 per coin level on Coinmarketcap. We will be using this period to provide some context on the bear market we are seeing 2021.
After news about a fork involving Bitcoin Cash in 2017, the price declined to about $5 per coin in a matter of days, with many holding the price at that level for over a week. In addition to this drop in value, there was another underlying issue that slammed Bitcoin at the time. Bitcoin Core never actually saw consistent user growth at the expense of the other coins. As of the end of 2016, the user growth was relatively weak. In contrast, Core saw impressive growth from the July 1, 2016 activation deadline to February 25, 2017.
Fast forward to June 2021: Blockchain analytic firms such as Glassnode are reporting a dramatic drop in transaction volumes and overall activity aside from mining. When you have a token such as Bitcoin, which is supposed to have achieved some sort of circulation by now, dropping off in terms of blockchain activity, there are reasons to be concerned.
Blockchain transactions and activity fell by a whopping 50%, from 1.2 TPS to 7.4 TPS in June. In addition, volume fell significantly: transaction volume declined from approximately 1,600 TPS per day, when we look back at June 2017, to less than 300 TPS. At the same time, transaction times are continuing to drop. This is despite more blocks being generated and with increased transaction fees for users with Bitcoin wallets. We saw the rise of Bitcoin Cash and now the Bitcoin price is falling.