By David Drake
Following last week’s price plunge, Bitcoin and other cryptocurrencies are beginning to recover. However, the road to recovery has not been smooth; it’s filled with ups and downs. Just this past Monday we saw the prices of all crypto coins drop by at least 10% based on CoinMarketCap data.
At the time of writing this article, the price of Bitcoin was $11,360 while Ethereum was trading at $1061. This was after the two leading currencies recovered from a drop that saw Bitcoin trade slightly above the $10,000 mark and Ethereum below the $1000 mark on Wednesday.
An inevitable pullback
Some cryptocurrency players feel that last week’s crash was somewhat inevitable. This is largely due to the different factors that seemed to work against the market. According to Logan Golema, Chief Technology Officer at Anthem Gold, the exit by Bitconnect and impending cryptocurrency regulation by South Korean and Chinese governments are on top of the list.
It is China and the volume of Bitcoin trading it controls that could have been the straw that broke the camel’s back, as observed by Sheldon Corey, the President of Worlds Financial Centre and Arges Inc.
“For a medium that lauds, and trades upon the merits of decentralization, Bitcoin is in fact, a very centralized market. According to Howmuch.net, 95% of all Bitcoins are held by just 4% of Bitcoin addresses. China is a Bitcoin behemoth with over 70% of all Bitcoin trading and Bitcoin mining taking place within its borders. So, as goes China, so goes Bitcoin, and as goes Bitcoin so goes the cryptocurrency market, at least for now. China’s Bitcoiners were scrambling last week, as the Chinese government made a full frontal assault against cryptocurrencies, threatening to cut access, and ban all cryptocurrency exchanges and currency mining.” he says.
The news that other governments were adding their voices to the push to abolish anonymous cryptocurrency accounts also catalyzed investor reactions.
“Other governments like France and South Korea have joined the rally against the anonymity of most digital currencies, in an effort to stop the proceeds of crime and fraud. So in the wake of such a negative news cycle, a pullback was inevitable, which was likely magnified by a regular sell-off at this time of year, as people pull out funds to pay for their Lunar holiday celebrations.” Corey says.
Although to investors the volatile cryptocurrency prices may pose a challenge, industry players seem to see an opportunity in the fluctuating prices. For companies that are currently running or getting ready to launch initial coin offering (ICO) campaigns, the fact that their coins are not listed on any crypto exchange yet is an advantage.
“This market crash can be a boom to ICO pre-sales such as ViMarket. Fear can be a stronger motivator than greed and currently a solution that addresses both these factors is a knockout punch. A pre-sale ICO purchase is sheltered from loss due to the fact that it is not listed on an exchange and exposed. Plus, pre-sales normally provide a bonus amount that offsets the loss just experienced by holders in return for parking their crypto value there for the month or two of the pre / ICO.” notes Neil Chandran, CEO at ViMarket.
There are also suggestions that the crypto market dip could be what the market needed to stabilize in the wake of high speculation.
Corey says: “Though the market drop seems great, Bitcoin is actually trading equal to the value it was just two months ago, in November of 2017. This could bring some stability to the market as the hype was getting out of hand, and it could represent a buying opportunity for the brave at heart.”
Despite the high volatility in the market, cryptocurrency players continue to exude confidence that the crypto market will recover. However, it is not clear how long this will take.
“We will know soon enough, as Wall Street issues its yearly bonuses in late January. This is bound to bring in some new investor money to the table. Greater adoption will eventually lead to greater decentralization. Cryptocurrencies are a young, unregulated, and volatile market, so we can expect much of the same kind of swings for the foreseeable future. At the WorldsFinancialCenter.com we regard these as simple growing pains, and expect the market to mature and stabilize with time. Hopefully this pullback brings with it, a greater search for real value among ICO investors, which would bond well for our ICO offering of real digital assets.” Corey says.
Image from pixabay