It’s been a rollercoaster ride for Bitcoin investors over the past few years.

The digital currency surged to nearly $20,000 in December 2017 before plunging more than 80% over the next 12 months. It then rebounded in 2019, but has once again lost ground in 2020.

What’s behind Bitcoin’s latest slump? And is the cryptocurrency likely to fall further in the months ahead?

Here’s a look at some of the factors that are weighing on Bitcoin.

The coronavirus pandemic has roiled financial markets around the world and sent investors fleeing to safe-haven assets like gold. Bitcoin, which is often touted as a digital version of gold, has failed to benefit from this flight to safety.

Instead, the cryptocurrency has been weighed down by concerns that it could be used to finance illegal activity. In early October, the U.

S. Department of Justice announced that it had seized more than $1 billion worth of Bitcoin that was linked to the Silk Road online marketplace, which was used for illegal drug sales.

This isn’t the first time that Bitcoin has been tied to criminal activity. The digital currency was also used on Silk Road’s successor, Alphabay, and on other dark web marketplaces.

These associations have made some investors leery of buying Bitcoin.

In addition, Bitcoin mining – the process of creating new Bitcoins – requires a lot of energy, which is costly and bad for the environment. The Cambridge Center for Alternative Finance estimates that Bitcoin mining consumed about as much electricity in mid-2020 as all of Argentina.

This is likely to become even more of a problem if Bitcoin usage grows significantly in coming years.

Finally, there’s been a proliferation of so-called “altcoins” in recent years – cryptocurrencies other than Bitcoin that have gained popularity with investors. These include Ethereum, Litecoin and XRP (the native token of Ripple’s payments network).

With more options available, some investors may be less inclined to put their money into Bitcoin.

All of these factors suggest that Bitcoin could fall further in the months ahead. However, it’s important to remember that the cryptocurrency is still up sharply from its lows just a few years ago, and it remains popular with some investors despite its recent struggles.

So while a further decline is certainly possible, it’s far from certain.

Since its inception, Bitcoin has been shrouded in a legal grey area. Is it a currency? Is it an asset? Is it a commodity? The answer to all three is a resounding maybe. This lack of clarity has made Bitcoin’s legal status somewhat difficult to determine. In some countries, such as the United States, Bitcoin is considered a commodity.

In others, such as China, it is considered a currency. And in still others, such as Russia, it is considered an asset.

This legal ambiguity has had major implications for Bitcoin’s use case as a currency. If Bitcoin is not considered a currency in a particular jurisdiction, then it cannot be used as legal tender.

This means that businesses in that jurisdiction cannot accept Bitcoin as payment for goods and services.

This has been the case in Venezuela since 2018 when the Venezuelan government declared that Bitcoin was not legal tender in the country. This decision was made in response to the economic crisis that Venezuela was facing at the time and was intended to crack down on cryptocurrency trading.

The government also placed restrictions on cryptocurrency exchanges operating in the country.

Despite the government’s crackdown on Bitcoin, trading activity has continued to occur on peer-to-peer (P2P) exchanges. These exchanges allow users to trade directly with each other without the need for a centralized exchange.

This has made it more difficult for the government to track and regulate cryptocurrency trading activity.

The Venezuelan government’s stance on Bitcoin has shifted over time. In 2019, the government announced that it would launch its own cryptocurrency, the petro, which would be backed by oil reserves.

This announcement led to speculation that the petro would eventually replace the Venezuelan Bolivar as the country’s legal tender. However, this has not yet come to pass and the petro remains largely unused.

As of 2020, Bitcoin is still not considered legal tender in Venezuela but trading activity continues to occur on P2P exchanges. It is unclear what the future holds for Bitcoin in Venezuela but it seems unlikely that the government will change its stance on cryptocurrency any time soon.

Bitcoin is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain.

Bitcoin is unique in that there are a finite number of them: 21 million.

Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services.

As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment.

The legal status of bitcoin varies substantially from country to country and is still undefined or changing in many of them. Regulations and bans that apply to bitcoin probably extend to similar cryptocurrency systems.[1]

In October 2013 the US FBI shut down the Silk Road online black market and seized 144,000 bitcoins worth US$28.5 million at the time.

[2] The US is considered bitcoin-friendly compared to other governments.[3] In China, buying bitcoins with yuan is subject to restrictions, and bitcoin exchanges are not allowed to hold bank accounts.[4][5].

On December 3, 2013, the central bank of China and four other central government ministries and commissions announced that Bitcoin is not a currency and can therefore not be used in the country’s financial system.[6][7] However it is not illegal to own or trade bitcoins in China.[8][9][10]

As of January 2018[update], BTCChina (now BTCC based in Hong Kong), one of the largest bitcoin trading platforms, had stopped accepting new account registrations from mainland Chinese users.[11] Bitfinex also briefly halted new account registrations but allows existing customers to continue trading unimpeded.[12][13][needs update] BTC-E was fined $110 million by US authorities in 2017 for laundering money,[14] but returned to full service under new ownership after being acquired by London Trust Media Holdings Limited on 1 February 2018,[15][16][17] now rebranded as Kraken.Coinbase requires extensive verification including pictures of an official ID and selfie.

[18][19] Due to legal concerns about potential money laundering,[20] some countries have banned or heavily restricted its use such as Ecuador where Bitcoin use was banned outright,[21][22] Bolivia where its use was heavily restricted,[23][24] Iceland where Bitcoin was declared illegal,[25][26] Vietnam where transactions using cryptocurrency were banned,[27][28] Russia where cryptocurrency trading ban has been proposed multiple times but has not yet been enacted,[29][30] Thailand where double taxation on cryptocurrency trading has been proposed but no definite plans have been made yet,[31][32] Taiwan where cryptocurrency trading ban has been proposed but no definite plans have been made yet,[33][34][35] and China where trading regulations have been released that may restrict cryptocurrency exchanges in future if they do not comply with regulation guidelines released by Chinese Authorities on 8 September 2017.[36][37]. In September 2018 India’s central bank RBI announced its decision to ban all cryptocurrencies within its territory effective immediately due to concerns about money laundering[38]. This ban however does not extend to foreign investors dealing with cryptocurrencies outside India[39].

The United Arab Emirates has been cautious about Bitcoin and other cryptocurrencies. The Dubai Financial Services Authority (DFSA) warned against investing in cryptocurrencies in February 2018.[40] The DFSA clarified that this warning was only directed at individuals and not at businesses operating within the DIFC.[40] The DFSA reiterated its warning about cryptocurrencies several times throughout 2018.

[41][42], most recently on December 11th, 2018 when it issued another warning about cryptoassets stating “the risks associated with buying, selling or holding cryptoassets are extremely high”[43]. Despite these warnings from the DFSA, there does not appear to be any law prohibiting the purchase or sale of Bitcoin or any other cryptocurrency in the UAE. It is possible that future regulation may be introduced but for now Cryptocurrencies appear to be legal in UAE.

The Reserve Bank of India (RBI) has been cautious about Bitcoin since 2013. They have issued multiple warnings about the risks associated with investing in Bitcoin, but have not outright banned it.

The RBI has been gradually warming up to the idea of cryptocurrency, and recently released a report that outlines their positive stance on the technology.

Bitcoin is not considered legal tender in India, but that does not mean it is illegal. The RBI has not yet released any regulations on Bitcoin, but they are expected to do so in the near future.

In the meantime, Bitcoin is trading on exchanges and being used for transactions without any issues.

The Indian government is also exploring the possibility of launching their own cryptocurrency, which would be regulated by the RBI. This would be a positive development for the cryptocurrency industry in India, and could lead to more mainstream adoption of Bitcoin.

Bitcoin is legal in India as of now, but regulations could change in the future. The RBI is taking a cautious approach to cryptocurrency but seems to be warming up to the technology.

The Indian government is also exploring their own cryptocurrency, which could lead to more mainstream adoption of Bitcoin in the country.