As of Tuesday morning, February 6th, Bitcoin had dipped below the $6000 level for the first time in 3 months. On January 6th, Bitcoin was sitting at just over $17,000 and a month of steady losses has intensified over the past month to bring the cryptocurrency’s exchange value back to where it was around November 13th. That was before the regulated US commodities and futures exchanges CME and Cboe announced they were to start offering Bitcoin futures, which sparked the frantic bull run up to around $20,000 pre-Christmas. The sell-off accelerated early this morning with a $1000 drop in under 4 hours between 00:45 and 05:00 GMT, over the Asian trading session.
There has been a slight recovery back up to around $6400 over the past few hours but the crash still equates to around 20% in 24 hours – heavy even for the standards of the volatile cryptocurrencies market. Bitcoin is not the only cryptocurrency to have been impacted with the overall market capitalisation of cryptocurrencies down $282.40 billion this morning, its lowest level since Nov. 26. The top 10 cryptos by market capitalisation all suffered similar crashes, down at least 20% each. Ethereum, which has been less volatile compared to its peers recently, actually suffered one of the heaviest loss with a fall of 29%. NEO, the target of a successful hacker theft from Japanese exchange Coincheck recently, lost 36% in 24 hours and Ripple and Cardano 24% respectively.
Despite the particular severity of yesterday’s drop, cryptocurrencies have been in a bear market since the beginning of the year. The rapid run up of Bitcoin and the wider cryptocurrencies market from November until pre-Christmas had led to wide calls of a bubble driven by intense media coverage. While it was always likely there would be a correction, the question is now how much further the market could drop. At previous stages over Bitcoin’s 8 year existence quick peaks were followed by corrections and then gradual recovery back to and beyond record highs set by the intense bull runs. However, the spectacular 2000% price gain of 2017 set a new precedent.
Many Bitcoin and cryptocurrency advocates had been predicting a sharp correction prior to consolidation and a more sustainable trajectory for prices. Now the first part of the forecast appears to have come to pass attention will turn to whether the market can show signs of a more sustainable pace of recovery over the coming months.
Regulatory crackdowns have been at least part of the trigger weighing on Bitcoin and cryptocurrency peers. In December, China shut down the country’s cryptocurrency exchanges, this year South Korea has mooted a similar move and India this week announced it would take steps to outlaw payments made in cryptocurrencies. China also announced it is extending its ban on cryptocurrencies trading by blocking access to foreign exchanges from within its territory.
It is becoming obvious that finding their space within the international regulatory landscape is the major hurdle cryptocurrencies will have to overcome in order to take their next significant step forward. How that process takes shape will dictate market development to a large extent over the next several months and years.
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