Over the past week and a half, the general direction of cryptocurrency markets has been down. It hasn’t been uniform with some cryptos, notably smart contracts platform cryptocurrency NEO yesterday, seeing gains. However, the clear market trend has been a strong downward slope since the peaks hit over the week following New Year.
After couple of days of losses on Sunday and Monday, following 2 days of positive returns immediately prior, most market participants were predicting Bitcoin prices to resume an upwards trajectory today. That didn’t prove to be the case and during the early morning the original cryptocurrency’s exchange rate dropped $1300 in an hour and a half. That took its price down to a month low of $11850, levels last seen on December 5th last year. However, the last time Bitcoin was below $12,000 was as it quickly moved to pass it on an upward trajectory towards $18,000 fuelled by optimism around the commencement of Bitcoin futures trading. Bitcoin prices have recovered slightly since and currently sit at just over $12,300
This morning’s price slump was not limited to Bitcoin and felt across major cryptocurrencies. Ethereum and Ripple saw even heavier losses of over 20%. Ethereum later recovered some of those losses and at the time of writing is down around 11% for the day. The two are cryptocurrencies tied to a blockchain smart contracts platform and blockchain money transfers clearing system respectively, rather than fiat currency alternatives.
Recent cryptocurrency losses appear to be tied to moves in South Korea to shut down local cryptocurrency exchanges. A bill to that effect was drafted last week, though it would still have to gain majority support in parliament to pass into law. That’s far from assured with cryptocurrencies hugely popular in the country. South Korea has the highest number of cryptocurrency traders and investors of any single nation and with local elections this year banning exchanges is unlikely to prove a popular move.
The country’s exchanges also saw a huge increase in business from China after exchanges there were shut down late last year. That may now also be under threat with rumours the Chinese government will also launch a clampdown on its citizens trading cryptocurrencies on overseas exchanges by blocking internet access to both them and online cryptocurrency wallets.
Today’s market jitters are likely influenced by South Korean and Chinese investors getting cold feet, worrying they may be cut off from cryptocurrency holdings and cashing them in. The question is now whether the cryptocurrency ‘bubble’ has burst and prices will retreat to levels seen prior to the last couple of months of 2017. The other scenario is that this is a set-back from which prices will subsequently recover from with a more stable and sustainable return to growth.
Many analysts of cryptocurrency markets have been predicting the kind of correction we have seen over the past week or so. A good portion of those generally bullish on cryptocurrencies longer term also see it as a ‘dip’ opportunity to buy. Time will tell but for those who have been considering investing online in Bitcoin or other cryptocurrencies, but felt values had raced to far ahead, now could be a good window of opportunity.
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