Its not been a good few months for global financial markets; there has been continued sell-off in most equity markets around the world, the outlook for our domestic housing market appears abysmal, and even gold has been loitering near support levels.
A few years ago, these are conditions that would probably have seen cryptocurrencies rise.
However, this time around, there has been an equivalent sell-off in cryptocurrencies.
To be fair, crypto markets have been falling since their peak in early 2018. However, in the two days between the 14th of November and 16th of November, there was a two-day crypto sell-off well in excess of practically any other financial market – a sell-off that was large, even by cryptocurrency standards.
The crypto index by CoinMarketCap attempts to track the total market capitalisation of the cryptocurrency space, it lost around 17 percent, or $35 Billion in capitalisation over those two days:
There are many possible explanations for the fall in cryptocurrencies, but it is unlikely that it is being dragged down by other financial markets.
Some crypto analysts are blaming technical or chart factors on bitcoin and other major coins, which have been on persistent downtrends since the start of the year.
“This [selloff] comes after a long period of tightening price action amongst Bitcoin, Ether and other cryptocurrencies and a breakout from this price range has been expected for a number of days, so the sudden volatility has not come as a surprise. This latest sell off suggests that buyers are still hesitant at this stage and are in search of more real-world use cases for cryptocurrency.” According to Henry James, deputy CEO and chairman at Fincross International.
Others are pointing to a recent change in Bitcoin-Cash, which is a bitcoin competitor that recently had a rise followed by a capitulation of more than 60 percent, as helping to force all cryptocurrencies lower.
The reality is that its probably a combination factors leading to the current sell-off in cryptos, not least of which the fantastic performance at the end of 2017, that likely saw a lot of new investors; who are now likely exiting the crypto space after almost a year of losses.
Many are suggesting that there could be more falls in store for the crypto space, with Bloomberg analysts suggesting that the price of bitcoin could drop another 70 percent from the current level, to $1,500 US. Even crypto bulls are forecasting that the market is unlikely to rise until Q2 2019 – where some believe longer-term bullish technical patterns will return to the markets.
Regardless, there are few shining light for the cryptocurrency markets at the moment, and I would not be surprised if further falls were in store for major cryptocurrencies.