Week in Review: Cryptocurrency Freefall Erases $40 Billion in Market Cap

Cryptocurrencies headed for their third consecutive down week Friday, with some major coins shedding 10% or more. Bitcoin and the major altcoins fell to their lowest levels in about six weeks as institutional traders awaited regulatory clarification before entering the market.

Geopolitics and strained trade relations between China and the U.S. triggered a flight to safe havens, with gold prices reaching their highest level in ten days. Stocks finished slightly higher after Federal Reserve meeting minutes showed no urgency on the part of policymakers to hasten the pace of interest rate hikes.

Crypto: The Great Unwind Continues

Cryptocurrency prices collapsed this week, with the total market cap bottoming near $326 billion as bitcoin threatened a bearish reversal and altcoins suffered a brisk selloff. By Friday, the market had recovered near $330 billion, having declined more than $55 billion from its recent peak.

Bitcoin bottomed below $7,300, with bounces limited to the mid-$7,500 range. The world’s largest cryptocurrency saw its share of the total market rise above 38% as other coins fell.

Compared with seven days ago, BTC prices are down more than 7%, according to data provider CoinMarketCap.

Cardano was the biggest decliner in the top ten, falling more than 15% week-on-week. Bitcoin cash plunged more than 12% and Ethereum shed 11.5%.

Crypto Bulls Maintain Their Optimism

Bitcoin bull Tom Lee described the recent slide in prices as “typical market volatility” as he held firm to his long-term price forecast. Fundstrat’s head of research still believes bitcoin will reach $25,000 this year as institutional interest heats up and mining remains profitable.

Lee also reminded investors that the vast majority of bitcoin’s yearly gains are concentrated over a ten-day period. Without those days, bitcoin is down about 25% each year.

“So as miserable as it feels holding bitcoin at $8,000, the move from $8,000 to $25,000 will happen in a handful of days,” Lee told CNBC earlier this week.

John McAfee has bet on bitcoin reaching $15,000 by the end of next month, a virtual doubling of today’s prices. The technologist has also predicted huge gains for bitcoin cash and EOS.

Geopolitics Drive Markets

Geopolitical tensions weighed on investors this week after U.S. President Donald Trump cancelled a planned summit with North Korean leader Kim Jong-un.

The mood improved on Friday as Pyongyang expressed its willingness to still go ahead with the meeting, which was scheduled for June 12 in Singapore.

“Very good news to receive the warm and productive statement from North Korea,” Trump tweeted Friday. “We will soon see where it will lead, hopefully to long and enduring prosperity and peace. Only time (and talent) will tell!”

Stocks resumed their slide on Friday as gold prices held near ten-day highs. Meanwhile, oil prices plunged after Russia said it was content with $60 a barrel oil.

“We’re not interested in an endless rise in the price of energy and oil,” Putin told said at the International Economic Forum in St. Petersburg, adding that Russia and OPEC do not plan to extend output cuts. “If you asked me what is a fair price, I would say we’re perfectly happy with $60 a barrel.”

The Week Ahead

After a thunderous rally in April, the month of May is shaping up to be a dud for crypto traders. It remains to be seen whether the downtrend will continue heading into June or whether a bounce back is in order. There are no major events scheduled in the cryptocurrency market next week, although developments concerning regulation and institutional adoption will continue to sway investors.

In terms of economic data, revised U.S. nonfarm payrolls and revised GDP figures will be in the spotlight next week. The Commerce Department will also issue the latest reading of core personal consumption expenditures, the Federal Reserve’s preferred measure of inflation.

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 Hacked.com and Contributor to CCN.com, 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