Although it’s generally hard to pinpoint the particular reasons why cryptocurrencies have fallen so much over the past week (some have already begun to recover), here are a few possibilities to consider.
- First, there is a possibility that blockchain or cryptocurrency projects may be liquidating reserve cryptos, converting them back into fiat currency.
- Second, the effect of a mass liquidation can create a “negative feedback loop,” one that creates fear in an already uncertain market, causing successive rounds of mass selling.
- Third, the sell-off in addition to any perceived lack of progress in crypto token and app adoption might be enough for anyone to ask whether such tokens are even worth holding and why. If nobody is using the tokens (yet) or the apps (yet), and if the cryptos are selling off, then why hold them unless you are a die-hard HODLer?
Matthe De Silva wrote an extensive piece on Forbes elaborating on these three factors:
The price charts resemble battlefields, with red arrows raining down relentlessly. Since the start of the year, the price of bitcoin has fallen by more than 50%, cutting more than $100 billion from its market capitalization. At the time of writing, Satoshi’s digital gold trades for around $6,400 per coin, a far cry from the $100,000 that some analysts predicted at the beginning of the year.
And it’s not just bitcoin.
For instance, since recording an all-time high of more than $1,400 in January 2018, ether has similarly plunged. In the past month alone, ether has shed nearly $11 billion in market cap (that’s equivalent to 55,000 Lamborghini Huracáns). Ripple’s XRP, which once hovered near $4 per unit, has also succumbed to gravity, crashing some 90% from its January peak.
The risk of loss in the trading of stocks, options, futures, foreign exchanges, foreign equities, and bonds can be substantial and is not suitable for all investors. Trading on margin or the use of leverage is not suitable for all investors and losses exceeding your initial deposit is possible. Supporting documentation is available upon request. Trading futures, options on futures, and foreign exchanges involves substantial risk of loss and is not suitable for all investors. Carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources and only risk capital should be used. Opinions, market data, and recommendations are subject to change at any time. The lower the margin used the higher the leverage and therefore increases your risk. Past performance is not necessarily indicative of future results.