It has been a bloody 48 hours for bitcoin and altcoins, as the whole crypto market has been experiencing severe dips. Bitcoin, which is usually the leader when it comes to price trends, lost over 12% of its value in the last 24 hours, and $5,000 since Monday. An even more scary thought to investors is that BTC dropped by 45% since last month, according to data from CoinMarketCap. Other big names like Ethereum and Litecoin were severely affected as well. ETH dipped below the $900 mark after soaring to almost $1,400 on January 14th, just days ago. Furthermore, the total market cap of cryptos dropped from $600B to $450B in only 24 hours. Why is the whole market collapsing? A few factors could have influenced the trends.
BitConnect shuts down following Cease and Desist
The cryptocurrency platform BitConnect has shut down its lending service, which was a huge part of the exchange. Thousands of individuals were lending part of their own funds to receive a small interest each day and make their portfolio grow. Many considered BitConnect to be a ponzi scheme, but it had been operating legally until now. After receiving Cease and Desist letters from two different states’ boards, Texas and North Carolina, the company decided to shut down the exchange, effective immediately. As a result, a lot of people lost all of their funds that were on the platform, and the news spread panic within the cryptocurrency community. It is safe to assume that this lead to a lot of investors panic selling their digital assets. When more people sell than buy, the price drops and the market dips.
South Korea cracks down on exchanges and cryptocurrency trading
News coming from South Korea in the recent weeks have been generally negative for cryptocurrencies. The South Korean government has recently announced that it will issue fines to virtual currency traders who are reluctant to using valid information on exchanges. Moreover, officials have stated that there will be new regulations and tax reforms for exchange platforms.
China promises new sanctions on trading
China has been attempting to regulate currencies for a long time now and is constantly making announcements that directly impact the markets. The government has stated that it wants to terminate centralized trading of cryptocurrencies and that it will do so with new sanctions that have yet to be announced.
Kraken vanishes… then reappears
After more than 48 hours offline, digital currency exchange Kraken finally returned online Monday. This downtime created huge fears amongst users, as they had flashbacks of the Mt. Gox era. This absence could have heavily influenced the markets, as investors could have sold in worry of such an event happening once again.
It is also interesting to point out that in the last years, bitcoin and other cryptocurrencies have experienced severe dips every January. This trend seems to be repeating itself this year. This could be due to taxes approaching, as cryptocurrency trading gains represent capital gains, and for some investors, it might be advantageous to sell right now. Will the market continue to severely correct? It is probable, but 2018 still looks like a very promising year for virtual currencies.