Crypto Market Sheds $50 Billion on Perceived Regulatory Risks

The global cryptocurrency market suffered huge declines on Thursday, with most major coins down double-digit percentages on reports of increased regulation in India.

Broad Declines

The selloff on Thursday mirrored similar corrections throughout the month of January. With the exception of DigixDAO (DGD), all 100 of the top cryptocurrencies traded lower, according to data provider CoinMarketCap. Double-digit losses were common, with the likes of bitcoin, Ripple, Cardano, Stellar and Litecoin falling 10% or more.

Bitcoin briefly fell below $9,000, reaching its lowest level since November. Ripple XRP, the fastest growing currency of 2017, also fell back below the $1.00 mark.

In terms of total market cap, cryptocurrencies sunk to a low of $452 billion. Bitcoin, once the overwhelming favorite, has seen its total market share drop to around 33%.

Thursday’s trade volumes averaged roughly $26 billion, with bitcoin accounting for 34% of the trades.

Uncertainty, Controversy Weigh on Market

The latest collapse followed reports that India was planning new restrictions on cryptocurrency trading. In a speech before parliament, Finance Minister Arun Jaitley said the government would clamp down on the use of crypto assets to finance illegal activities. Many mainstream media outlets took this to mean an all-out ban on cryptocurrency. This is somewhat confusing, given that India already considers cryptocurrencies to be illegitimate.

Regulatory uncertainty continues to be the thorniest issue facing global cryptocurrency markets. Last month, concerns over a tighter clampdown on South Korean exchanges triggered one of the biggest two-day selloffs in history.

Markets are also on edge over fears that bitcoin prices may have been artificially inflated by digital currency exchange Bitfinex, which was recently subpoenaed by the U.S. Commodity Futures Trading Commission (CFTC) along with Tether, a crypto startup with the same executives.

Tether is a unique case because it is supposedly backed by U.S. dollars. However, analysts have questioned the voracity of those claims, with some arguing that Tether is issuing new coins to inflate the value of bitcoin to cover solvency issues.

The price of bitcoin ballooned to the $20,000 range in December, bringing its total market cap to $330 billion. The coin’s total market value has fallen to less than half that level.

Analysts bullish on bitcoin believe now to be the biggest buying opportunity. Most medium-term price forecasts share the view that BTC is likely headed higher, although the road to getting there will be volatile.

Market strategy firm Fundstrat recently gave bitcoin a year-end price target of $25,000. Others, such as cryptocurrency asset manager Jeet Singh, believe bitcoin could reach $50,000 by the end of the year.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi