The market value of the most highly sought after digital coin, Bitcoin, plunged below 5000 U.S. dollars for the first time in 13 months. This depreciation has also affected the other widely traded cryptocurrencies like ethereum and ripple.
Since the sector is not entirely transparent, analysts are struggling to understand what precisely prompted the latest drop. They speculate that it might be attributed to the tussle over the control of a smaller crypto operator called bitcoin cash.
It was also speculated to the civil penalties that the U.S. Securities and Exchange Commission took against two cryptocurrency startups that staged initial coin offerings, or ICOs. Airfox and Paragon Coin Inc. will each have to pay 250,000 U.S. dollars in penalties to compensate investors and will also have to register their digital tokens as securities.
“The selloff is related to enforcement, which is almost certainly underway. Projects are being made to return investor money, which, after having spent a ton of money marketing their $100 million ICO on a lavish party-filled road-show that was the norm for this vintage of ICOs, will be tough”,
said Justin Litchfield, chief technology officer at ProChain Capital.
Other major cryptocurrencies also saw similar plunges in the past 24 hours, with Ethereum dropping 15.2% and Bitcoin Cash falling 13.1%. This highlighted the fact that crypto trading is too unregulated and risky to be considered a safe investment for the public at large.
“Bitcoin collapsed like a house of cards on Monday” Lukman Otunuga, research analyst at FXTM quoted. He further added “While most are blaming the Bitcoin cash ‘hard fork’ as a key player behind Bitcoin’s weakness, technicals could have played a role. The weekly close under the $6,000 level was a bearish confirmation of further downside. The cryptocurrency has scope to extend losses if sellers are able to conquer the $5,000 level”.
“The next logical level of support is at $5,000 but if that doesn’t hold, the next logical support level isn’t until $3,500. With all the falling prices lately, this definitely fits the definition of a buyers market”,
eToro analyst Mati Greenspan said in a note to clients.
Bitcoin is now down more than 30% since last Thanksgiving, when it gained wide popularity status and became a common topic for discussion.
These are just passing phases and Bitcoin is resilient enough to recover and embrace the market. The intelligent investor should not be deterred from such incidents.