A wild week for the cryptocurrency market ended on a sour note. The price of the most significant coins fell significantly on Thursday, following several days of fluctuations. In total, the market capitalization for all cryptocurrencies fell from a peak of about $120 billion to about $103 billion by Friday morning. It was the most significant one-day drop in the market this year and left many investors wondering what happened to crypto. Here are some background details, along with potential explanations as to why the crypto market has taken such a hit recently.
Bitcoin's drop and the decline of altcoins
First, let's look at the price of bitcoin, the most widely traded cryptocurrency. The cost of bitcoin fell by more than 10 percent on Thursday, following several days of relatively mild fluctuations. The decline came after the U.S. Securities and Exchange Commission (SEC) announced that it had rejected several applications for bitcoin-based exchange-traded funds (ETFs). The SEC ruling sent bitcoin's price tumbling. The negative impact of the SEC ruling on altcoins was even more significant. The most significant decline was seen in ICON and VeChain, which fell by more than 25 percent. Altcoins have been hit by a general decline in investor sentiment towards the crypto market. This has been chiefly due to the SEC ruling and lingering uncertainty related to the regulation of initial coin offerings (ICOs).
ICO regulation in Korea
As we have seen, ICOs have been a significant driver of investment in the crypto market. ICOs have become increasingly popular over the past year, as companies have raised billions of dollars in financing. In 2017, ICOs raised more than $4 billion and about $6 billion in the first two months of 2018. But ICOs and the blockchain funding model have faced increased scrutiny from regulators worldwide. Although regulatory bodies are still figuring out how to handle this new crypto phenomenon, many have voiced concerns that the lack of transparency and investor protections in ICOs put people at risk. In fact, in February 2018, the South Korean Financial Services Commission (FSC) issued a ban on all ICOs within South Korea. This was part of a broader effort to address the issues associated with ICOs and protect investors. However, just as the crypto markets were starting to recover, the FSC issued a new ordinance that clarified its stance on ICOs. This ordinance showed that the South Korean FSC thinks ICOs can be essential in developing blockchain technology. However, they must be regulated to ensure transparency and protect investors.
Bitcoin Cash woes
Another significant factor that weighed on the crypto market was the decline of Bitcoin Cash. Bitcoin Cash is an altcoin that was created due to a hard fork in the Bitcoin blockchain in August 2017. It is currently the fourth-largest cryptocurrency in terms of market capitalization. Over the past month, Bitcoin Cash has seen significant fluctuations as investor sentiment towards the coin has changed. On February 23, the price of Bitcoin Cash hit an all-time high of almost $4,000. Three days later, however, it fell to a low of around $1,150. This price drop has been attributed to two factors. The first is the "bad press" surrounding a dispute between mining pools over implementing changes to the Bitcoin Cash blockchain. These factors have created significant uncertainty regarding the future of Bitcoin Cash. This uncertainty has likely made investors cautious and led them to sell off their Bitcoin Cash holdings. The second factor is that investors have shifted their attention to other coins. This is likely because they see Bitcoin Cash's price rising too quickly, making it more likely to be the focus of regulatory action.
Ethereum's collapse
The most significant drop, however, was that of Ethereum, the second-largest cryptocurrency by market cap. Ethereum's price fell by more than 20 percent in the last 24 hours after rising more than 300 percent since January. This drop was likely due to several factors, including the general decline in investor sentiment towards the crypto market, uncertainty surrounding the outcome of the Ethereum network split and regulatory concerns. Many investors used the network split to sell Ethereum to get their "free" Ethereum Cash tokens. Many of these investors have likely now sold their Ethereum Cash tokens, driving down the price of Ethereum. Moreover, some investors have been wary of investing in Ethereum because of regulatory concerns. Ethereum has been dogged by regulatory uncertainty in many countries, including India.
Litecoin and Stellar dive too
But not only Ethereum and Bitcoin Cash have seen significant drops in their price. Ether's "little brother," Litecoin, has also significantly decreased its price. Ether's "big brother," Bitcoin, has also suffered a significant price drop, although it has only fallen by about 5 percent in the last 24 hours. Stellar, one of the market's more stable coins, has also seen its price fall by about 9 percent over the previous 24 hours.
Conclusion
Overall, it has been a rough week for the crypto market. The price of bitcoin and most altcoins has fallen significantly, while the cost of Ethereum has plummeted. The best thing to do in times like these is to remain calm and not panic and sell your crypto assets. The market will likely recover soon, and when it does, it will be an excellent opportunity to buy crypto assets at a discount to their current price. There are many reasons why the crypto market has taken such a hit recently. Bitcoin Cash's dramatic drop, Ethereum's dramatic fall, and the general decline of the crypto market have been attributed to several factors, including the general decline in investor sentiment, uncertainty surrounding the outcome of the Ethereum network split and regulatory concerns.
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