Cryptocurrency markets remain in a sea of red, with heavy selling on global markets in the wake of a sell-off which began late yesterday in Asian trade.
Earlier this morning, Bitcoin dipped below $US10,000 on some exchanges before rebounding.
Bitcoin has shed as much as 25% in a 24-hour period, plunging through the lows that struck on the last major crypto selloff on December 22.
A short time ago, prices were holding at slightly above $US11,000 — still a fall of almost 50% from the high of around $US19,800 set last year.
For comparison, the “Black Monday” crash in US stocks of 1987 was a fall of just over 22% in the Dow Jones Jones Industrial Average.
This chart from Markets Insider shows bitcoin’s fall.
Other major cryptocurrencies have also been heavily sold, with Ethereum down as much as 33%, Ripple’s XRP down 47%, and Litecoin down 35%.
Chris Weston, Chief Markets Strategist at IG Markets, said the initial sell-off triggered by further regulatory crackdowns in Asia had turned into stampede to sell.
“Clearly there is a rush for the exit, with the end of the mania/hysteria/hype phase more than confirmed,” Weston said.
“All the news flow is all negative here and there is a lack of upside catalysts, with regulatory crackdowns looming large.”
Graeme Moore, an Executive at Polymath — which provides a blockchain platform for issuing tokenised financial securities such as stocks and bonds — said further price falls may follow.
“We will likely continue to see increased volatility in the near-term with the possibility of a further 50% drop, or a reversion back up to previous prices of some cryptocurrencies,” Moore said.
“Some cryptocurrencies recently saw run ups of 100x increases relative to USD. It makes sense that we are currently seeing downward price pressure as people take profits and hands who bought the top are shaken out,” he added.
“I think the wind has been taken out of the sails of many coins that rightfully should not have been trading where they were.”
Ryan Breslow, the founder of Blockchain payment platform Bolt, said regulatory developments were a catalyst for the latest market activity, although the complexity of the market makes some price movements hard to explain.
“Price drops are familiar territory to people who have been investing in cryptocurrency for a while. This seems to have been triggered by regulatory uncertainty, between China’s ban on most cryptocurrency-related activity to rumblings of regulatory agencies across the globe,” Breslow said.
“This triggers a global wave of market reactions that are difficult to truly understand. If price drops concern you, you are not in it for the long-run, and you should not be holding cryptocurrency.”
Mati Greenspan, an analyst at the trading platform eToro, told Business Insider that trading volumes had fallen significantly in Asia.
“The volumes have been declining steadily both in Japan and South Korea over the last few days,” Greenspan said.
“This morning, the combined volume from these two top cryptotrading countries dropped below 30%. Looks like they’re tired of overpaying for cryptos and waiting for the market to even out.”
The looming crackdown by Asian authorities as part of broader regulatory oversight of cryptocurrencies in global market.
Last week, the Australian Tax Office announced it was setting up a network of specialists to ensure Australian cryptocurrency investors were meeting their tax obligations.
Daniele Bianchi, the Assistant Professor of Finance at Warwick Business School in the UK, said the increased regulation is a natural consequence of the rapid growth in the market for cryptos.
“The situation is not the same across countries however,” Bianchi noted.
“While the South Korean and the Chinese governments are planning to take decisive steps in monitoring and limiting trading in cryptos, the Russian government has drafted a new bill for the legalisation of cryptos trading in authorised platforms.”
“The bottom line is that, although governments need to put in place efficient regulations that prevent investors getting into difficult situations, the way such regulations are drafted will largely depend on their view of cryptos as a useful financial innovation rather than a threat,” Bianchi said.
Andy Bromberg, the CEO of Coinlist — a platform which manages new Initial Coin Offerings (ICOs) — said the current selloff was somewhat expected.
“We wouldn’t be surprised if bitcoin drops below $10,000. Ethereum dropping below $800 would be more surprising, but not a total shock,” Bromberg said.
“As always, we see a combination of factors leading to a market move like this. Of course regulatory news plays a role, but we’re also seeing many investors take profits as the tokens hit or near symbolic highs.”
“In such a young market, significant profit-taking can drive the prices down more than one might expect. But we’re expecting a continued secular rise in the long term.”