Bitcoin falls below $500 — and it could go much lower

The digital currency is showing its inherent instability

Bitcoin
(Image credit: (REUTERS/Jim Urquhart))

Almost four months to the day since the digital cryptographic currency first rose in price above $1,000 per coin, Bitcoin is back below $500 over fears that China — where Bitcoin became popular as a means to evade the government's currency controls — is about to crack down on Bitcoin usage. This is just the latest setback in a difficult period for Bitcoin, which included the shutdown and bankruptcy of Mt. Gox, formerly the largest Bitcoin exchange, and the loss of millions of its customers' coins.

Bitcoin's growth up to this point has consisted of a series of bubbles — rising rapidly in price for a time, only to crash back down. However, Bitcoin has taken many more steps forward than backward. At $500, it's still much, much more highly-priced than it was at this time in 2013, 2012, or 2011. This has allowed it to retain forward momentum, bringing new users into the ecosystem. As a result, early investors made huge returns on their investments, like the Norwegian man who bought $27 worth of Bitcoin in 2009, forgot about them, and discovered they were worth $886,000 by 2013. These kinds of stories generated media buzz that only fed the Bitcoin craze, and helped the currency ride out slumps.

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John Aziz is the economics and business correspondent at TheWeek.com. He is also an associate editor at Pieria.co.uk. Previously his work has appeared on Business Insider, Zero Hedge, and Noahpinion.