5 Possible Reasons for the Fall in Prices of Cryptocurrencies
December 23, 2017
Until December 22, the world of сryptocurrency was experiencing stable growth. It seemed like everywhere you looked, your favorite cryptocurrency easily coped with new record highs, breaking any barrier on its way.
In fact, according to OnChainFX, in the past four days, all the top-20 cryptocurrencies have hit record highs.
But yesterday there was a steep drop-off in Bitcoin, which brought down the price to $ 12.5 thousand, and caused the drop off all other major cryptocurrencies. This amounted to more than a 20 percent decrease in the overall capitalization of the global cryptocurrency market (currently operating at $ 478 billion, compared to $ 611 billion).
Many are still wondering what could have caused such a massive drop. There are 5 possible explanations for this fall:
- "New Year"
At first it might seem ridiculous, but with major holidays like Christmas, Hanukkah, Kwanzaa and New Year being celebrated at the end of the year, is bad time for savings accounts and investments, as many seek to cash out annual profits.
Setting aside speculation and general stir around blockchain technology, at present very few cryptocurrencies serve a purpose that benefits the average consumer more than cash does. With a few exceptions, cryptocurrency is more difficult to use for everyday transactions, because many of them exist on the market solely for speculative investment. Speculative buyers do not necessarily equate to market stability, as many will seek to cash out early profits, rather than hold the currency for sudden market rate jumps.
The end of the year marks the time when these investors are likely to convert their winnings to cash, and yesterday - just a few days before Christmas - the market has experienced the greatest impact of such behavior.
- Altcoin Overload
As mentioned above, after the initial Bitcoin’s price rise, altcoins like Cardano, Qtum, Ripple, TRON, Verge and others also have been experiencing huge growth, having set new records.
If Bitcoin was just the only coin, everything would be fine, but Bitcoin is the "gold" of the cryptocurrency world, the standard by which all other coins are measured. So whether we like it or not, every altcoin owes his success and failures to Bitcoin.
- Bitcoin Cash Confusion on Coinbase
On Tuesday, Coinbase announced that it would support the purchasing and selling of Bitcoin Cash (BCH) on its platform. Since the August fork, there have been a lot of heated discussions about what cryptocurrency is the “true” Bitcoin. Many have suggested that BCH would end up on Coinbase, but even the most optimistic forecasts were "put" for January-February 2018.
So it's no wonder that the rapid growth in price made by BCH a few days before the official announcement caused many users to blame the platform for insider trading. As the result Coinbase has completed the BCH trading within a few minutes to carry out an internal investigation of possible insider trading.
- Market manipulation
A recent report in Bloomberg showed that a group of 1000 investors owns 40 percent of all Bitcoin. This means that even if some of them act together, they will have the potential to manipulate the entire market. These "whales" (investors and hedge funds) could easily have engaged in "painting the tape", creating a high transaction volume, simply selling and reselling the currency on small margins to inflate the value of Bitcoin.
Why would they do that? So that they could sell off at the highest possible price before causing a crash by selling all their Bitcoin. Of course, this can only work until others start to take notice the falling and start selling their own Bitcoin. So-called "whales" often manipulate the market, by selling off at record highs, dropping the market to record lows, and then buying back in. This is made even more attractive with the launch of Bitcoin futures tradings on Cboe and CME.
- Hacking and regulation
Earlier this month the Security Exchange Commission suspended PlexCoin on charges of being ICO scam, and this week it reportedly suspended trading in The Crypto Company over "concerns about the accuracy of the provided information" and stock manipulation. Meanwhile, Youbit, the popular South Korean exchange, announced as its closure on December 20 after the hacker attack (presumably by North Korea) and its loss of 17 percent of all assets.
There is a chance that the general concern caused by these events has scared off potential investors and even forced existing participants to reduce their assets