Up in smoke: The Bitcoin price and Ethereum price have crashed

Over the past week, the Bitcoin price and Ethereum price went into a nosedive.

Ethereum has fallen 35% in a week and more than 59% since its high of $391 five weeks ago.

The bitcoin price is down 22% in a week and more around 35% since June 11th.

What’s going on?

These two cryptocurrencies have been making waves the world over in 2017, with punters/traders making big bets on more price increases.

In less than five years, the Bitcoin price has risen from well below $1 to its recent high $3,018. While the idea behind Bitcoin and many of the other online currencies is to change the world’s payments systems, at the moment, it uses appear more limited to the realms of trading and price speculation.

“It’s a market wide sell-off that is the result of >4 months of FOMO built on weak hands”, Andreas Antonopoulos, author of “Mastering Bitcoin” was cited as saying by CNBC.

However, Bitcoin is expected to undergo a series of significant and necessary changes to its underlying code. These changes will address concerns around its ability to transform the currency into a secure and anonymous payments system, capable of handling many more transactions every second – similar to Visa and Mastercard.

But given that Bitcoin is an open-source software, meaning that there is no central authority or owner of the system, deciding on and implementing the changes is not straightforward.

Some punters are suggesting the market for Bitcoin may grind to halt momentarily if the software changes are implemented at the beginning of August.

“It could be people who are not comfortable in holding Bitcoin because of August 1st due date”, Andrea Medri of The Rock Trading was quoted as saying on CoinDesk.

Indeed, there is really no way of knowing just how the changes will play out.

And as I noted here, the pricing of crypto currencies appears more about belief in the idea. Indeed, if enough people believe it will work, it’s a self-fulfilling prophecy.

But when they stop believing…who knows.

Foolish Takeaway

I would rather get rich the tried and true way than buying crypto currencies.

That’s especially true now, with changes looming and perhaps even slowing enthusiasm for these two currencies.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. You can follow him on Twitter @OwenRask.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Mastercard and Visa. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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