Market Rebounds after Cryptocurrency ‘Bloodbath’
On January 17, 2018, the cryptocurrency market almost unanimously plummeted by around 20 to 40 percent and almost erased any progress made by the industry in terms of market capitalization within the past couple of months. Bitcoin, the world’s most valuable digital currency, dipped by over 30% in the past two days and was traded for as low as $9,200 on some exchanges. Ethereum also briefly dipped below $1,000 after achieving $1,400 just a few days ago.
Several factors can be blamed for this week’s cryptocurrency crash, including increased fear of government regulation, scalability problems involving bitcoin and Ethereum and the partial collapse of the anonymous exchange, BitConnect.
Over the past few days, rumors have been alleging that South Korea may introduce legislation to ban the trade of cryptocurrencies in the country. Considering that the South-East Asian market is responsible for a large portion of the total bitcoin trading volume, rumors of an upcoming ban likely triggered fear among many newer traders.
BitConnect, an exchange derided by most in the cryptocurrency ecosystem, also shut its lending platform prior to the crash and is likely to have contributed, in part at least, to the loss of investor confidence in other digital currencies. The company was accused of being a ponzi scheme because of its structuring as a multi-level marketing scheme. BitConnect’s own token, BCC, dropped 90 percent during this entire saga.
That said, it didn’t take long for the cryptocurrency market to recover from the crash after it became obvious that the the rumors related to South Korea were largely misconstrued and false. At the time of writing this article, bitcoin is testing the $12,000 barrier once again and has been on nothing but an uptrend since first dipping well below $10,000 only a day ago.
Despite the market improving, the underlying damage and threat to the entire digital currency economy has far from blown past. At $12,000, bitcoin still remains close to 40% lower than its price in December 2017 when it achieved an all-time high valuation of close to $20,000. The reversal of the past few days’ correction has, so far, not managed to restore the total cryptocurrency market cap back to its previous figure of three quarters of a trillion dollars either.
Given the market’s potential for extreme volatility, some even believe that the ongoing bloodbath in the cryptocurrency market is perhaps just a taste of what is to come. Whatever the case may be though, bitcoin, at least, has always bounced back, even from the extremely damaging Mt. Gox scandal of 2013. A similar show of resilience in the near future will quite possibly propel the entirety of the cryptocurrency market past this bear market.