It has not been a good week for cryptocurrencies, particularly Bitcoin.
In less than a week, the price of Bitcoin has lost more than 25 percent of its value as it settled on Tuesday at $4,387. This pales in comparison to the cost of Bitcoin in December 2017 when it almost hit the $20,000 mark.
This dramatic drop stems from moves last week by the US’s Securities and Exchange Committee (SEC) to crack down on two crypto companies, Airfox and Paragon Coin, which launched initial coin offerings (ICOs) and sold coins while failing to register them as securities.
Both companies have agreed to pay $250,000 in fines as a result of their transgression and list their tokens as securities with the SEC.
Talking about this drop, Justin Litchfield, CTO at ProChain Capital, said, “The selloff is related to enforcement, which is almost certainly underway.”
“Projects are being made to return investor money, which, after having spent a ton of money marketing their $100 million ICO on a lavish party-filled road-show that was the norm for this vintage of ICOs, will be tough,” he added.
Bram Cohen, co-founder of Chia, a digital currency currently in the works, agreed, stating, “It’s always suspect guessing the cause of short-term price movements, but it seems likely that a lot of what’s going on now is ICOs trying to liquidate all their cryptocurrency for cash to make off with the goods before the SEC comes down on them.”
Neil Wilson, the chief market analyst at Markets.com, said, “The crypto bloodbath continues,” as “things looks like they only get worse from here. Where is the incentive to buy? It does rather look like the bottom is coming out of this market.”
Central banks were quick to react to the news, issuing warnings to individuals looking to get involved in the cryptocurrency market.
Other cryptocurrencies were also affected and sustained severe drops to their value. Both the price of Ethereum and Bitcoin Cash fell by 15.2 and 13.1 percent, respectively.
Greater Volatility Expected for the Cryptocurrency Market?
In addition to this, greater volatility is expected in the cryptocurrency market following the hard fork of Bitcoin cash last week.
More specifically, according to Bloomberg’s Vildana Hajric, “volatility has returned to cryptocurrencies, with the largest tokens shedding billions in market value since the hard fork of Bitcoin Cash debuted last week.”
Furthermore, writes Hajric, these fluctuations “came as two software-development factions failed to agree on a way to upgrade the offshoot of the original Bitcoin, leading to a computing power arms race.”
Plenty Remain Bullish on the Future of Bitcoin & Cryptocurrencies
Despite this drop in price, plenty involved in the cryptocurrency market remain positive as to its future, with a particular focus on the robustness of the crypto market’s infrastructure.
For instance, Gabor Gurbacs, Director at VanEck, believes, “Large financial institutions are more focused on proper market structure than short term price fluctuations. How do we properly value digital assets? How do we custody digital assets? Are their ETFs available with proper market and investor protections? Most large institutions do not really care if Bitcoin ends 2019 at 3,000 or 10,000. I think market structure is getting better every day and crypto start to look more and more like the commodities and equities markets.”
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