"Bitcoin costs 4,000 USD - the lowest price since October 2017. A week ago this popular cryptocurrency cost 35% more. Not only one factor caused the drop in prices, there are at least a few," writes Bartosz Grejner, Conotoxia Analyst.
However you look at this year's decline in cryptocurrencies, the numbers are shocking. The whole cryptocurrency market's value decreased by around 650 billion USD (from almost 8000 to 145 billion USD). When bitcoin was at its high, it was worth nearly 5 times more than today, and ethereum (the 3rd largest cryptocurrency) even 10 times more.
The tremendous losses coincided with the so-called “hard fork” of Bitcoin Cash, i.e. the introduction of new software, which in practice causes the cryptocurrency to be divided into two. Such a process usually introduces a big element of uncertainty, therefore, even before the division planned for November 15th, some market participants preferred to protect themselves and limit their cryptocurrency investments.
For several months now, cryptocurrencies have been under pressure from the threat of lawsuits, which the SEC is allegedly preparing against many entities primarily connected with ICOs, i.e. Initial Public Coin Offerings. Last Friday, the day commencing the "hard fork", the SEC announced that Airfox and Paragon Coin, Inc. will have to pay compensation of 250,000 USD each to investors for not registering their ICOs as securities. They will also be forced to register their ICO tokens as securities.
Registration equals greater restrictions, which ICOs were practically devoid of in the past. The chances have now increased that the SEC is preparing further penalties and in practice, it will bind the hands of other entities. Some investors and companies are also likely to reduce their exposure to cryptocurrencies in order to be ahead of this move. This further increases the wave of sales.
It seems that the "hard fork", the SEC’s decisions and fast selling were the main reasons for the current sell-off, but it is important not to forget that already in the last two months the whole market has been close to the lowest levels since November last year. The period of low but stable quotations was brutally terminated by a combination of negative factors and the surge of further psychological barriers (first 6,000 and then 5,000 USD), which accelerated the depreciation even more.
High volatility, which is a well-known feature of cryptocurrencies, has returned, at least for the coming weeks. Although at some point in time it is possible, and probable that a rebound will be observed, the speculative nature of these movements may cause the price of bitcoin to reach 3,000 USD within a week, but also return to 6,000 USD. It is worth noting that, in mid-July last year, bitcoin cost less than 2,000 USD. Therefore, downward potential is still high.