And they all fall down.
Bitcoin price, which tumbled to its lowest price for this year yesterday, fell further this morning and the cryptocurrency’s valuation crashed to below $100 billion for the first time since the end of October last year. Cryptocurrency markets fell in tandem with bitcoin price. As of this writing, they are valued at $184 billion. The last time their valuation hit this figure was at the beginning of November 2017, on the cusp of a massive rally in cryptocurrency prices. At 19:30 UTC, bitcoin was changing hands at $5525.85, according to Coindesk.
Why Are Cryptocurrency Markets Crashing?
Most experts are blaming the fork of bitcoin cash, a cryptocurrency that itself came into being after a split in bitcoin’s blockchain last year, for the sudden price movement in crypto markets.
According to Tanooj Luthra, co-founder of Elph – a decentralized network built on ethereum’s Plasma sidechains, the fork could result in shifts of mining power between bitcoin and bitcoin cash. (Mining power plays an important role in cryptocurrency supply and, consequently, price.) This is because both cryptocurrencies use the same mining algorithm and miners typically move mining resources between the two cryptocurrencies, depending on market conditions.
The bitcoin cash fork will result in two new cryptocurrencies – Bitcoin ABC and Bitcoin SV – whose valuations are uncertain. “Some of that uncertainty carries over into whether people will still be mining bitcoin at the same rate, if the value of bitcoin cash’s forks increases,” explained Luthra.
That could result in further pain for crypto traders.
Derek Urben, chief financial officer at Coinigy – a cloud-based trading platform, says bitcoin is still overpriced and has room to fall further. He bases this assessment on two factors. The first one is the low value for Network Value to Metcalfe Ratio, which correlates the cryptocurrency’s network growth to its valuation. Added to that is the fact that trading volume still accounts for a bulk of transactions on bitcoin’s network. “In other words, if one were to argue bitcoin should be used as a medium of exchange, the organic activity is still very low,” he said.
The absence of major catalysts, such as bitcoin ETF approvals, for cryptocurrency growth in mainstream or institutional investing also means that cryptocurrency markets might miss out on holiday cheer. “I expect crypto to continue its plateau or slight downturn into 2019, save for a large corporation, either institutional or retail, entering the market – much like Fidelity,” he said.