The reason why Bitcoin falls is because its intrinsic value is lower than it’s actual price.
The same thing happened during the housing crisis of 2008, the stock market crash of 1929 and even the Tulip Bubble in 17th century Holland.
In each case, the value of the assets were much lower than the market price. Then the prices adjusted once people realized they were over-paying. We may see the odd bounce on BitCoin if there is a perceived temporary scarcity, but in the end, it is worthless.
The value of any asset (shares, BitCoin, houses, tulips, cash) is precisely what we, as a society, agree it is.
For example, if I am selling my house, and put it on the market for $150K, and you buy it for $150K, then it is worth $150K. If you feel it is worth less than that, you will put in a lower offer. If I accept that lower amount, then it is worth that lower amount. Simple.
Here are some indicators that a bubble is about to burst…
Early adopters spend a lot of energy convincing late adopters to invest their money. They do this to get the price up, then sell. It is called ‘pump and dump’ - it’s a little telling that there is a term for it, huh? A good sign that this is happening is when people throw money at something they don’t understand. How many people investing in BitCoin or similar can explain to you how it works? Not many. It is no longer investing, it is speculating - gambling.
People start using debt to invest. This is a real killer. It can be buying something on margin - effectively when you can buy something by only putting down a deposit. If the share price goes too low, you not only lose your ‘deposit’, but also money you don’t have. If you (and millions of people like you) can’t pay, the market crashes. It can also be buying BitCoin on a credit card, or taking out a very high mortgage you cannot afford if interest rates change.
Speculators ride the wave. I have heard a number of people tell me how much they have ‘made’ with BitCoin or other crypo-currencies. On each occasion, I have asked if they have locked in their winnings by selling their asset. The answer has always been ‘no’. You haven’t made anything unless you sell. Most gamblers will ride that avalanche right to the bottom of the hill.