BITCOIN is being used as a “gateway drug” that gets people hooked on cryptocurrency investment before they then move their money into digital currencies such as Ethereum or Ripple, a US analyst has suggested.
Nicholas Colas has claimed that there is a correlation between the number of people searching for Bitcoin on Google and the number of people investing in the online money.
However, he highlights that once people are more educated on cryptocurrencies they move away from the original digital currency and towards alternatives.
He said: “Going into December, Google searches skyrocketed.
“You saw that correlates to the total increased number of wallet growth, which doubled in December from approximately five per cent to 10 per cent as Bitcoin rallied.”
In December Bitcoin reached its highest ever value after a phenomenal year of growth.
Bitcoin reached an all time high of nearly $20,000 (£14,000) in December last year after its price rose by more than 1,500 per cent since January when the value of a single Bitcoin was $954 (£668).
However, since reaching its all-time high the currency has had a turbulent time and saw its value drop to $8,369 (£5,870) last week.
Mr Colas argues his theory of Bitcoin being a “gateway drug” helps to explain the sudden fall because of a lack of interest in researching Bitcoin on Google.
He said: “Bitcoin is considered the gateway drug to all cryptos and it has acted exactly that way.
“Right now the Google search data is telling me there’s not really that next leg up in Bitcoin because there’s not that interest that leads to wallet growth that leads to price appreciation.”
Mr Colas claims that there has been a fall in Bitcoin’s price because those who started investing towards the end of last year are now looking to put this money in alternative cryptocurrencies.
He explains: “Some of the movement in Ethereum, which has traded much better in January, is just money which is being pulled out of Bitcoin.”
However, other financial experts have offered alternative theories as to why there has been a sudden decrease in interest in Bitcoin investment.
Both India and South Korea have announced plans to regulate cryptocurrencies.
Bitcoin and blockchain expert Simon Taylor said: “I think it’s evidence of a government trying to get its hand around a subject which was seen as ungovernable.
“Historically we thought this thing was decentralised, there was no way to control it but what you have here is centralised exchanges. This is the same as a bank. This is something that holds the bitcoin or the digital currency on your behalf.”
Miles Eakers, Chief Market Analyst at Centtrip, has warned that the price is likely to continue to fall if more countries consider regulating the digital market.
He said: “We anticipate there will be more of such protectionist regulation. This is likely to put Bitcoin under more strain, causing it to drop to the $8000 a coin level.”