What’s happening in the cryptocurrency market?
Cryptocurrency owners will have been following the market for all alt-coins over the last few days and holding their breath. The sudden downtrend in value has alarmed some, although seasoned crypto watchers are more likely to say, we’ve seen this before, so let’s wait and see what happens next before panic selling.
You have heard it before and doubtless you will hear it again; cryptocurrency is a volatile market, but as Sean O’Grady at the UK’s Independent newspaper wrote on 17th January, it is not the only market showing volatility. Perhaps it is just that the highs and lows happen with greater speed. It is also true that because it is a relatively new market, compared with oil, gold or coffee, there is more hype around it combined with little understanding of blockchain technology in the mainstream media, which seems intent on raising investor fears. Things are slightly calmer over at the crypto publication like Coindesk and Cointelegraph. Or at least, the reasons for the recent drop is better understood and explained.
So, what are the reasons for a drop in the market cap to US$530 billion from 680 billion a few days ago? The first thing to look at is what is happening in South Korea. The government there has been making noises about prohibiting cryptocurrency to a certain extent. However, a petition signed by hundreds of thousands of Koreans in support of crypto, which also called for the resignation of the Finance Minister, stopped any extremely radical move by the government. Still, an event like this affects the market, as it would any market, and it is likely that we will see the South Korean government introduce some form of regulation in the near future. This has scared some investors off, hence the downturn in value, which for some will signal a time a buy the top cryptocurrencies, and then we will see the market return to upward movement.
Another factor that may be involved is the involvement of institutional investors. As The Merkle reported on 16th January, the first CME and CBOE Bitcoin futures expire on 17th January, commenting: “institutions who have shorted Bitcoin are pushing the market down to take maximum profits from the impending closures, in which “losing” long positions will be forced to liquidate and reward their winning counterparts.”
Then there is another reason that few in the mainstream media have mentioned: this dumping of crypto assets happens every January. Post-Christmas debts and the upcoming Chinese New Year are factors in crypto owners selling their coins in order to get liquidity, buy gifts and travel. It may be a mundane reason, but it has been noted as a trend for some time. Bitcoin went through this scenario last January, when it started the year with a valuation of around $1,000. During 2017 it rebounded and surged ahead to reach an all-time high of $20,000. It may be much lower than that today, but many firmly believe that Bitcoin and the other top alt-coins will bounce back and benefit form an even bigger pump.
Added to all this, the crypto market analysts point out that during 2018 there are going to be even bigger and better blockchain technologies appearing this year, Lendo being one that will change the conventional lending sector. This suggests that the future for crypto assets is a very long way from being a bubble that is about to burst: instead it is a force that is gathering momentum.