Crypto Market Slumps on Sunday as Volumes Plummet

Cryptocurrencies declined in value on Sunday, as bitcoin and the major altcoins struggling to extend their weekend rally. While there was no immediate catalyst for the decline, trade volume has been linked to recent price movements in the market.

Volume Declines

Trade volume across all cryptocurrencies weakened to just $12.8 billion on Sunday, according to data provider CoinMarketCap. The top-five cryptocurrencies by market cap each saw their daily volumes fall double digits percentage-wise, with bitcoin plunging 21%. Ripple’s XRP witnessed the most dramatic 24-hour drop, as turnover plummeted 50%. Demand for Ethereum, Litecoin and bitcoin cash was down between 10% and 15%.

Markets added nearly $20 billion on Saturday thanks to an upsurge in trading activity on Binance, the world’s largest crypto exchange by turnover. At the time of writing, Binance accounts for roughly one-quarter of total trade volume, according to LiveCoinWatch.

Binance CEO Zhao Changpeng remarked on Saturday that trade volumes are “returning across the board” following an abrupt decline. Activity on Binance had declined after Japan’s financial watchdog suspended the exchange from operating domestically.

In terms of value, the total cryptocurrency market was down 4% on Sunday to $330.2 billion. Twenty-eight of the top-30 coins faced declines.

Bitcoin last traded at $8,565 for a loss of around 4.2%. Even with the dip, bitcoin’s dominance index has grown to 44%. That represents an increase of around 12 percentage points from January’s all-time low.

Balancing the Short-Term and Long-Term Outlooks

Cryptocurrencies are not expected to shake off volatility anytime soon, which means a classic V-shaped rally is unlikely to materialize in the near term. The market is down roughly 36% from last month’s swing high of $518 billion.

Interestingly, the crypto market’s fundamentals haven’t changed very much over the past six weeks and have remained remarkably steady since the bull market rally of 2017 and early 2018. However, the one variable that investors may have over-emphasized is the level of institutional interest in cryptocurrency.

For example, CME reported a tepid response to its bitcoin futures contract at the December launch, with many investors rattled by the dire warnings (i.e., FUD) circulating through the market. Since bitcoin peaked near $20,000, there’s been a lot of speculation about net sellers controlling the market. After all, it is easier to sell bitcoin futures than it is to short the cryptocurrency on any of the major exchanges. That said, it remains too early to deliver a verdict on the success of bitcoin’s institutional assets.

In terms of fundamental drivers, most of the major developments in the cryptocurrency market are overwhelmingly positive. Bitcoin’s scaling and privacy features are improving, new protocols for enhancing ICOs are underway and major institutional partnerships involving the world’s largest cryptos are announced regularly. Blockchain uptake among institutions, governments and startups is also growing substantially.

The regulatory outlook is arguably the biggest barrier investors face. While it’s difficult to predict how the regulatory landscape will evolve, concrete rules on trading, taxation and ICOs could provide a greater sense of clarity that the market currently lacks. Although governments have proven they know very little about cryptocurrency, their efforts to police the market is simply a way to protect citizens from the so-called bubble. This is no different than previous paradigm shifts in the global economy.

If last week’s G20 summit was any indication, officials don’t believe cryptos pose a serious risk to financial stability – at least, not yet. This will likely change in the future as the digital asset class expands past the $1 trillion mark and beyond.

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