Trading is far too thin to be a useful indication of anything. (And since trading volume is capped by block-size, we’re stuck with this reality for the time being — which makes the price highly vulnerable to gaming.)
The major exchanges and trading platforms are all amateur hour, and most have perverse incentives to front run (whether for themselves or premium clients), which can tilt prices even more dramatically. Market manipulation is rampant and structurally impossible to solve short of mass action or outside regulation.
Bitcoin was never really intended to be a store of value (at least at the expense of being a practical currency). That doesn’t mean it can’t become one, but it does mean that you have separate classes of investors, each with different goals for what Bitcoin should be. Miners and hodlers want it high, and the currency crowd wants it low. Those forces will pull at each other in unpredictable ways (the short-term effects of which will then be amplified by the thin trading volumes).
Most quoted theories about the current price-drop don’t stand up to scrutiny. For example, it’s been obvious for some time that China was going to ban local access to global exchanges. This information should have been priced in. And the fact that some futures are closing next week is largely immaterial given the tiny quantities in question.
Simply put, trading is based on sentiment, without anything fundamental to act as an anchor. There is no true waterline, whatever small snapshots in time might suggest. Ignore the hundreds of hot-take explanations suggesting “well, the problem is that amateurs who don’t understand Bitcoin’s true value came in and pushed the price up above where it should have been.” This is the sort of nonsense that makes a bubble a bubble. The closest that Bitcoin has to a true value is: (i) its demand for use-cases where it’s the only medium of exchange for a given purpose (few of them legal or good), and (ii) the recovery cost of miners.
Neither of those dynamics support a price at $10k or any other high number. They work just as well at $5k, or less.
Being candid, trying to make sense of all the tangled signals involved is on the level of reading tea leaves. We might be right in our guesses, but we’re often right about a lot of things by accident (especially when we’re gambling on a binary outcome — it’s much easier to pick a single winner than say that of a multi-team tournament). The only sure thing is that volatility will remain high.
Case in point, I made a gentleman’s wager in early December with two fellow Quorans that Bitcoin would break the $10k floor by year’s end (it was then trading at around $16k). Turns out I was off by two weeks (it fell to a low of $9,200 this morning). Does this make my prediction meaningful? Not really. It was a gut instinct. The price could just as easily have hit $25k and I wouldn’t have been terribly surprised. Hence why I only bet a latte.
We have to be real about the limitations of knowledge here. Sure, it’s a fun thing to banter about, or to bet on with our spare cash. And, sure, we can make some logical predictions about how governments may act or how state-sponsored competitors may muddy the waters. What we can’t do is know for sure what will happen to prices in general. If someone says otherwise, they’re either trying to make a name for themselves or trying to take your money. Beware of both.