November 2018: Mensis Horribilis For Crypto Markets

In November 2017,the price of bitcoin skyrocketed from $6,777.77 at the beginning of the monthto $10,219.30 by its end. The swell in bitcoin’s price helped push cryptocurrency markets to new heights.

A year later, the price trajectory looked similar, except in the opposite direction. Bitcoin’s price atthe beginning of the month was $6,381.96. By the end, it had almost halved, touching a low of $3640.56 on Nov. 26, before attempting a modest recovery. According to online publication Coindesk, this was the worst monthly decline in its price in seven years.

Bitcoin dominates cryptocurrency markets and accounts for more than halfof its market capitalization. Its price movements have a domino effect on the price for other coins.  

Other cryptocurrencies,which are mostly spawns off bitcoin’s blockchain, also fell in response to bitcoin’s slide. The top five coins all had double-digit declines in their valuations. Ripple’s XRP, which has faced increased scrutiny regarding its status as a token, overtook Ethereum’s ether to become the world’s second-most valuable cryptocurrency.

But that’s not saying much considering the 22.5% drop in its valuation. Meanwhile, ethereum’s ether bested XRP’s decline, falling by 43.5%. The price for Bitcoin Cash, which underwent a contentious fork, crashed by almost 60% as traders exited their holdings from the currency. Unlike January, when an exodus from bitcoin swelled valuations for other coins, there were no winners this time around and the overall market cap for cryptocurrencies crashed from $205.5 billion at the start of this month to $130 billion approximately by its end. For the most part, cryptocurrency markets were in tatters this month, having lost most of their gains from the past year. 

How Does the Crash in November Affect Crypto Markets?

At first glance,the crash in crypto markets might be bad news. The outward signs, at least, seem to hint as much. Institutional investors, whose entry was supposed to bring liquidity to crypto markets, seem to have hit a pause in their crypto plans. Coindesk’s gathering of institutional investors for crypto markets was mostly empty this year. Bakkt, the ICE-owned crypto trading exchange which had received much press coverage when it was launched, has postponed the launch of its first product. Michael Novogratz’s crypto merchant bank Galaxy Capital declared losses of $134 million in its first quarter this financial year.   

Bitcoin Trading Volumes (Last Five Months) Source: bitcoinity.org

But the downsizing of market valuations for cryptocurrencies alsoreintroduced volatility into crypto markets. Volatility is good because itenables traders to make money off their holdings. Trading volumes jumped during November. At the month’s start, the trading volume was $11 billion. It peaked at $24 billion on Nov 20 before declining.