For cryptocurrency traders 2018 is proving to be a disappointing year. The last couple of days have seen both Bitcoin and Ripple drop in value, with losses of more than 10% since Tuesday. These losses eliminated the recent gains – moving from $6,000 to $7,400 – that Bitcoin had seen in recent weeks.
Trader sentiment plays a huge role in the financial markets and more so for cryptocurrencies. Recent speculation that Goldman Sachs, the world-renowned investment bank, has taken the decision to abandon the creation of a crypto trading desk sparked renewed scepticism in investors, who looked at this move as the ongoing legitimation of cryptocurrencies.
For those still reeling from the burst of the Bitcoin bubble at the start of the year, when it dropped from $20,000 in December 2017 to $6,200 in February 2018, it was another blow. Crypto traders, in general, remain cautious of the markets and appear more likely to bail out at the first signs of weakness – and it looks as if this has fuelled the sell-off over the last two days.
The recent weeks’ volatility, culminating in the sharp drop, will make the next few days very interesting for crypto market enthusiasts. The $5,500–$6,000 zone is proving to be a floor for Bitcoin this year and it would not be surprising to see the markets stabilise again ahead of this zone.
However, the performance of the cryptocurrencies over the past few weeks is a stark reminder that they are still incredibly volatile markets, very affected by short-term sentiment and can change direction very quickly.