Cryptocurrencies Undergo Christmas Correction as Market Cap Plunges $190 Billion
The global cryptocurrency market is undergoing a massive correction Friday, as bitcoin and the top-20 coins plunged at least 20% each. The massive decline follows weeks of unprecedented growth that took the global market cap well north of $650 billion.
The combined value of all cryptocurrencies in circulation has plunged nearly $190 billion since Thursday, according to CoinMarketCap. At $464 billion, the market cap is at the lowest level since Dec. 12.
Trade volumes exceeded $43 billion over the past 24 hours, with bitcoin accounting for nearly 47% of the daily transactions.
Bitcoin’s Dramatic Decline
The violent selloff was triggered by a 23% correction in bitcoin that sent prices below $12,000 on the Coinbase GDAX exchange. At press time, bitcoin was down 14% to $13,385. The decline shaved tens of billions of dollars from bitcoin’s market cap, which now stands at roughly $220 billion.
It was only last week that BTC/USD was testing new highs near $20,000 as rallied behind the introduction of bitcoin futures. But we wrote earlier, institutional investment is no guarantee that bitcoin will continue higher in the short term. The success of the derivatives contracts could depend on whether the so-called ‘bitcoin billionaires’ embrace these new markets. As it currently stands, about 1,000 investors hold roughly 40% of all bitcoin in circulation.
All the major altcoins suffered huge losses Friday, a sign that the broader market was still following bitcoin’s lead. There were no immediate catalysts for the decline, which suggests that investors were taking profits after the record build up in recent weeks. As veteran cryptocurrency traders would attest, huge price swings in the market is fairly common.
Below is a recap of the major losers on Friday:
Despite the recent price collapse, 2018 is expected to be a huge year for cryptocurrency as more institutions embrace the alternative asset class. On Thursday, Goldman Sachs Group announced it was entering the cryptocurrency market. According to Bloomberg, the bank’s crypto traading desks should be ready in time for summer.
There’s also evidence that bitcoin derivatives contracts will continue to proliferate as Nasdaq gets ready to join CBOE and CME in offering futures trading. Recent activity at the Securities and Exchange Commission (SEC) also suggests more firms are lining up to offer bitcoin exchange-traded funds (ETFs). According to the SEC’s public filing system, two companies have recently submitted applications to launch a bitocin-based ETF.
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.
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