Cryptocurrencies plunged on February 2, with bitcoin at one point sliding below $8,000 and headed for its biggest weekly loss since December 2013, amid worries about a regulatory clampdown globally. The currencies have come off their lows but analysts said the sell-off was probably not over.
This week’s slump brought the total market value of cryptocurrencies down to around $400 billion, half the high it reached in January this year, according to industry tracker Coinmarketcap.com.
Bitcoin, the biggest and best-known cryptocurrency, fell as much as 15 per cent to a two-month low of $7,625 on the Luxembourg-based Bitstamp exchange. It clawed back some losses and was down around 5.6 per cent at $8,498 in late New York trading.
The virtual currency is down by close to 25 percent this week and almost 40 percent in 2018. It surged more than 1,000 percent though in 2017. For some market participants, bitcoin may be down, but it is not likely to fade.
“Bitcoin has become, and will continue to be, primarily a speculative asset class,” said David Moskowitz, Co-founder and Director of Indorse, the decentralized social network for professionals.
He added that the recent drops in transaction fees have made it easier to use bitcoin for payments once again. And if a payment solution can help the congestion, bitcoin may once again become an effective payment network, Moskowitz said.
Retail investors have poured money into digital coins, enticed by the huge run-up in prices. Regulators say cryptocurrencies are highly speculative and dangerous investments.
On February 1, India vowed to eradicate the use of crypto-assets, joining China and South Korea in promising to ban parts of the nascent market where prices have boomed in recent years.
Critics of virtual currencies have called the run-up in prices a speculative bubble, but supporters of cryptocurrencies say short-term price volatility is to be expected, and the blockchain technology underpinning these assets maintains its power and value.
Going back to 2011 and including the current selloff, bitcoin’s price has been halved nine times on the Bitstamp exchange before recovering. The last time was from November 2014 to January 2015.
