The pain intensified for cryptocurrency traders yesterday after bitcoin lost $4.8 billion of its market capitalization with a sharp 11% decline in its price within 24 hours. The cryptocurrency began the day testing the $4,000 mark, per data from online publication Coindesk. Within seven hours, however, it had fallen to $3,316.13. That fall included a steep 8% drop in its price in 2 hours. As of this writing, bitcoin is trading at $3396.13, down 7.75% from its price 24 hours ago.
Ripple’s XRP and Ethereum’s ether also fell out of favor with traders and recorded double-digit drops. Trader funds flowed into Tether, a stablecoin that is pegged to the US dollar and is generally used to convert by traders to convert back to fiat currency, and USDC, another stablecoin launched by crypto exchange Circle. The overall market cap for cryptocurrency markets fell from a peak of $123.4 billion yesterday morning to $106.7 billion by its end. As of this writing, it is $108.7 billion, down 87% from its peak during the first week of January this year.
There might be a bump in prices ahead. “A high level of short positions indicate that we could see an increase in volume and price as traders cover their positions,” writes Mati Greenspan, analyst at eToro – an investing platform.
What Caused the Crash In Cryptocurrency Markets?
As with past instances, there is no clear explanation or reason for the sudden drop in bitcoin’s price. The fall gained speed and traction after Asian markets came online, indicating that traders from the region were participating in the selloff.
Zennon Kapron, director at Kapronasia, a fintech consultancy, told CNBC that there was a “general bearish trend” in the market due to “general negative sentiment” towards crypto. “As the market is heavily retail driven, it’s very much at the mercy of group sentiment which causes huge swings,” he said and predicted the trend would continue into 2019.
To be sure, news within the last 24 hours may have contributed to the negative sentiment.
The SEC postponed a final decision on a bitcoin ETF application filed by investment firm VanEck to Feb 27, 2019. In its letter announcing the postponement, the federal agency stated that it had received 1600 comments regarding a rule change to allow bitcoin ETFs. “The Commission finds it appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change,” it wrote.
Some consider the introduction of a bitcoin ETF to be a catalyst for the cryptocurrency’s next bull run. This is because a bitcoin ETF would make bitcoin investment accessible to and safe for daily traders and institutional clients.
Community members of ethereum’s blockchain also received bad news yesterday. Consensys, an NYC-based firm which is considered a leader in ethereum research and development, announced that it was laying off 13% of its staff. ETCDEV, a development team for ethereum classic, also announced that it was shutting down. Since the start of this month, the price for ethereum’s ether has fallen by 30%. It recorded a drop of 15% in its price yesterday.