Since the middle of the last week, the digital asset market has been in the red, marking a 12-month low. From Wednesday to Thursday, the total capitalization of the cryptocurrency market declined by almost 14%, falling from $210 to $180 billion. According to Coinmarketcap, today the total capitalization of cryptocurrency is slightly higher than $160 billion. Nevertheless, this is the lowest figure since the beginning of the year, during which the market has never dropped below $200 billion. DeCenter figured out the possible causes of such a sharp collapse.
On Thursday, together with the crypto market, the first cryptocurrency updated its annual minimum as well. From Wednesday to Thursday, Bitcoin lost more than 12%, and its exchange rate was $5,509. Almost all other altcoins followed Bitcoin: Ripple fell 9.5% to $0.4; Ether by 13% to $175.5; Bitcoin Cash 8% to $441; Stellar by 9% to $0.2; EOS 13% to $4.4; Litecoin by 14% to $42; Cardano by 15% to $0.06; and Monero by 15% to $86.5.
Moreover, among the top 100 cryptocurrencies by capitalization, only five coins were in the green, and three of them were the stablecoins: TrueUSD (+0.29%), USD Coin (+0.83%), and the Paxos Standard Token (+0.39%). Insight Chain (+2.76%) and the record holder of the week, Nasdacoin (+300%), also were among the “gainers.”
By Friday morning, however, the situation stabilized, and, according to Coinmarketcap, the total market capitalization added $4 billion, amounting to more than $184 billion. Despite that Bitcoin fell by another 1.3%, the rates of the Ripple (+2.8%), Stellar (+4.7%), and EOS (+0.8%) went up.
Possible Reasons for the Fall of the Crypto Market: Expert Opinion
Among the key events that influenced the instant collapse of the cryptocurrency market, first of all, it is worth noting the hard fork of the Bitcoin Cash network that took place on November 15th. The update of the fourth-largest cryptocurrency by market capitalization caused a split in the crypto community by launching two competing chains, Bitcoin ABC and Bitcoin SV. According to Brian Kelly, the head of the investment company BCS, this hard fork caused the “civil crypto war,” as a result of which, some market players chose to withdraw their assets, which, in turn, gave rise to a massive collapse of cryptocurrency rates. Speaking of the hard forks of Bitcoin Cash, it is worth noting that, despite the official support of large mining pools of Bitcoin SV, today, Bitcoin ABC has a significant share of the network’s hash rate, 67%, while Bitcoin SV has only 13%. At the same time, the Bitcoin ABC chain overtakes Bitcoin SV by 45 blocks.
The past hard fork is not the only reason for the collapse of Bitcoin and the crypto market. According to the senior analyst of the eToro cryptocurrency trading platform Mati Greenspan, among the factors that influenced the situation on the market, it is also worth considering the sale of shares of technology companies and the likelihood that the fall of the Bitcoin exchange rate below $6,000 caused the automatic execution of stop-loss orders on the exchanges.
In turn, the founder of the Metal Pay blockchain company Marshall Hayner believes that the current collapse was caused by the revision of short-term expectations regarding the bull trend in the market, which, according to some players, would happen at the end of the year. As a result, these players decided to keep their assets and wait for a more prosperous time to trade.
Donald Bullers from Elastos also sees the critical reasons for the collapse in the past forks of Bitcoin Cash and analysts’ forecasts, which predict a prolonged bear market in 2019. As Bullers noted, crypto investors quickly respond to any changes in the market, which we saw in the example of past market collapse.
CoinShares Director of Strategic Development Meltem Demirors also believes that the main reason for the sharp collapse was the withdrawal of assets by financial institutions and the hard forks of the Bitcoin Cash network. But, according to the representative of the company, before the end of the year, several events will occur that will positively affect the situation on the crypto market. On December 12, the Bakkt cryptocurrency trading platform will be launched, which is designed for institutional investors. At the same time, the investment company Fidelity Investments is working on starting a service for working with cryptocurrencies.
Speaking about the future of the crypto market, Rohit Kulkarni, managing director at SharesPost, noted that he sees three factors that will affect large-scale changes in the next six months: “First of all, there will be more clarity regarding the position of regulators, which can encourage positive market development. Also, a few promising blockchain startups that have held crowd sales over the past year will present their innovative commercial products. And the final factor will be the growth of investments from experienced, well-informed market participants, as well as the accumulation of institutional capital, as a result of which investors will mark the bottom of the market.”