Crypto currencies went through a rough period in the last seven days with about $18 billion being washed away off the total value of global crypto currencies within just a few days.
Bitcoin, the largest and the widely owned digital currency of the world started a downslide during the middle of the week and according to data from CoinDesk, touched lowest for the current month on Wednesday evening at below $6,200. This afterte digital currency had started off the week at around $6500. It however stabilized during the week end,.
The fate of other crypto currencies, known as “alt coins,” was much worse. There was a drop of 12 per cent in the value in a week for ether, the second-largest crypto currency in the world in terms of market capitalization, while there was an 18 per cent decline in value in the same period for third largest crypto currency XRP. According to CoinMarketCap.com Bitcoin cash saw a fall of 14 percent, while a 10 per cent drop in EOS was also noted,
Compared to the total market capitalization for crypto currencies of $219 billion on Tuesday, the value on Friday was $201 billion. The market had reached a peak of $820 billion in January this year.
According to Brian Kelly, founder and CEO of BKCM, a rumour that all deposits from fiat currencies would be stopped by crypto currency exchange Bitfinex sparked off the sell-off.
“That spooked investors a little bit — it was a main cause of the downdraft but we’re seeing prices mostly back to normal,” Kelly said. The exchange reacted to the reports and attempted to reassure investors by saying that “Bitfinex is not insolvent, and a constant stream of Medium articles claiming otherwise is not going to change this.”
According to Kelly, the recovery of bitcoin was partly due to some positive regulatory news from Asia. It was reported that an initial stance on the initial coin offerings would be announced by South Korean financial regulators in November. And a news report from Bloomberg said that local bank accounts would be helped to be set up for existing crypto currency firms by regulators in Singapore.
This week would have been particularly disappointing for those investors who viewed crypto currencies to be a form of value, or “digital gold”. There was a drop of 1300 points for the U.S. stock market along with the fall in bitcoin.
The crypto currency markets suffered because of the uncertainty around stocks, said Joe DiPasquale, CEO of cryptocurrency fund of hedge funds BitBull Capital.
“When we saw equity markets crumble, there was some fear in the cryptocurrency market as well,” he said. “I think there was an initial jolt due to larger market activity and the sell off.”
Since the beginning of summer, the value of bitcoin has remained between $6,000 and $8,000. The impetus that is need by the crypto currency market to break out of that range could be some form of positive news related to crypto currencies such as news of any potential investment from Yale’s endowment or an ETF winning approval, DiPasquale said.
(Adapted from CNBC.com)