Based on performance over the last month, it seems winter is definitely coming to the crypto markets.
Bitcoin, which has been holding above the $6,000 mark for months, tanked to $4,000, dragging its peer cryptos down. Look at Ethereum, which was flying high at $700 just a few months ago. Now it is barely trading at $130.
Could anyone explain what is actually happening? Let’s find out some at least slightly reasonable explanations to the crypto nightmare.
Crypto hype is over
Despite the fact that many crypto experts kept a positive view on crypto performance in November, and even predicted a bull run for Bitcoin the next year, the numbers don’t lie.
In fact, the crypto hype hasn’t been matching the reality, and after it’s gone, we got what is now called a crypto bloodbath.
The major catalysts of the crypto wipeout
Cris Burniske, a Placeholder Management partner, defines three major factors in the recent crypto crash:
The US stock market retracement
The Bitcoin Cash hard fork
The US stock market has been steeply declining in value since the Dow Jones crash in October. Analysts predict the US economy may repeat the crisis of 2008 in the coming years.
According to Chris Burniske, the drastic price drop of major stocks forced investors to revise their portfolios, refusing from high-risk investments like cryptocurrencies.
He also pointed out that the civil war between the Bitcoin SV and Bitcoin Cash camps caused a lot of uncertainty in the market, bearing on the dropdown.
According to CoinMarketCap, Tether is the second most traded cryptocurrency after Bitcoin. Often known as a stablecoin, Tether claims that each token is backed by $1 USD.
However, investors are also losing faith in Tether due to its failure to show the adequate reserves backing the cryptocurrency, the shady relationship with the Bitfinex exchange and an ongoing investigation of its role in manipulating the Bitcoin price.
According to Bloomberg, researchers claim that “Tether was used to buy Bitcoin at pivotal periods, and that about half of Bitcoin’s 1,400% gain last year was attributable to such transactions”.
SEC is sick…
…of fake tokens flooding the market. Cryptocurrency regulation seems inevitable and is supposed to stop the Wild West activity that we’ve seen on the crypto markets lately.
The world's most power efficient Bitcoin miner, Bitmain, has been recently planning a huge IPO, which was supposed to become the biggest in history.
Bitmain’s IPO promised to become a massive driver of Bitcoin success. In light of the recent market situation, these plans were put on hold.
Is there light at the end of the tunnel?
Ultimately, blockchain technologies and cryptocurrencies have developed a brand new industry. Today, the major concern is not whether the cryptocurrency prices will rise or fall, but whether the technology is progressing.
Crypto expert Jameson Lopp sounds optimistic enough: “Crypto capitulation is once again upon us, but before the markets can rise again, we must pass through the darkest depths of despair. Investors will continue to speculate while developers continue to build.”
The situation may be not all that gloomy. If the cryptocurrency markets manage to demonstrate strength and stability within the current low price range, the chances for a mid-term recovery by the first half of 2019 will significantly increase.