Market value worth more than $170 billion from the entire crypto currency market was wiped off on Monday after a fall in the value of bitcoin and other digital coins.
According to Coinmarketcap, at 12:10 p.m. Singapore time, the total market capitalization or value of the crypto currency market was $959.53 billion compared to a total value of $1.1 trillion a day earlier.
At that time, there was about a 11 per cent drop in the value of bitcoin, the largest crypto currency, compared to a day earlier $35,828.06, at around. A 15 per cent drop in the value of the second largest crypto currency – ether, was recorded at $1,126.72.
Crypto currencies have seen a huge rally in recent weeks and the selloff potentially indicates profit accumulation by investors.
Despite the falls, the value of bitcoin is still 340 per cent higher than 12 months ago and the virtual currency hit an all time high of just under $42,000 last week.
“The correction we saw was expected as we believe the BTC price surge recently from under $20,000 to $40,000 in the past four weeks will induce sell pressure,” Simons Chen, executive director of investment and trading at cryptocurrency financial services firm Babel Finance, said.
Chen said that the currency reaching the $40,000 mark could have been the trigger for investor to take home profits.
A number of factors including more buying from large institutional investors has been attributed to the resurgence of the bitcoin.
It has also been referred to as “digital gold” used to indicate a potential safe-haven asset as well as a hedge against inflation. With bitcoin competing with gold as an “alternative” currency, its value could reach as high as $146,000 in the long term, JPMorgan in a recent research note. However, it was necessary for bitcoin to become significantly less volatile in order to reach this price, noted the investment bank’s strategists.
Bitcoin is known for wild price swings.
On the other hand, bitcoin has been called a bubble by some of its critics such as David Rosenberg, economist and strategist at Rosenberg Research.
However there is still long term bullishness around bitcoin.
The drop in value of bitcoin could be a good entry point for new investors, said Jehan Chu, founder of cryptocurrency-focused venture capital and trading firm Kenetic Capital.
“This short term correction is both natural and needed, and is a great entry point for long-term investors as we quickly reach $50k this quarter and $100k by year’s end,” Chu said.
Bitcoin could go above $100,000, Social Capital’s Chamath Palihapitiya said last week.
“It’s probably going to $100,000, then $150,000, then $200,000,” Palihapitiya told CNBC’s “Halftime Report.” “In what period? I don’t know. [Maybe] five or 10 years, but it’s going there.”
(Adapted from CNBC.com)