According to the news report by Bloomberg, the cryptocurrency market has plummeted, with Bitcoin dropping below the $5,000 mark for the first time since October 2017.
On Monday, Bitcoin fell as much as 14% during US trading hours to below $4,700, before recovering slightly. Rival cryptocurrencies Ether and Ripple were trading mostly flat yesterday, however, overnight, they too plunged more than 16%.
The cryptocurrency market has continued its freefall, with most of the tokens listed falling by double digits. Data from Coinmarketcap shows that the market capitalization of the cryptocurrency market is at $147.62 billion, a massive $50 billion drop since yesterday.
The price of Bitcoin is down to $4,633.90 at the time of writing. The price of Ether is currently at $134.93 and the price of Ripple is at $0.453504.
The market is rife with speculation about what caused the cryptocurrency market to crash. On Friday, the US Securities and Exchange Commission (SEC) announced that it had penalized two cryptocurrency companies with its first ever civil penalties for not registering their tokens as securities when they launched their ICOs.
The two companies, Airfox and Paragon Coin Inc. have been slapped with $250,000 fines each. Over and above that, they have also been asked to reimburse their investors, register their tokens as securities with the SEC and to provide periodic financial reports about their operations.
According to the Chief Technology Officer of ProChain Capital Justin Litchfield, the market sell-off is due to enforcement, which is now finally underway. He said that ICO (Initial Coin Offering) projects are being forced to return money to their investors, which is going to be tough for those companies.
However, others feel that this theory about the market sell-off may be overblown. Data from market researcher Elementus shows that many ICOs have already used the funds they raised and have probably already converted to their cryptocurrencies to fiat.
Another theory – the more popular one – is that the market crash was caused by the Bitcoin Cash hard fork that took place on November 15. The hard fork took place due to a bitter dispute between two software-development factions of Bitcoin Cash (BCH), where they could not come to an agreement about how the BCH network should be upgraded.
This led to a massive computing power (hashrate) race between the two warring factions, which caused the network to split.
So far, the cryptocurrency industry has lost more than $670 billion in capitalization since its peak in January this year. Bitcoin alone has lost more than 70% from its all-time high in December 2017, when the world’s number one cryptocurrency touched a price of $20,000.
Managing partner of Fundstrat Global Advisors, Tomas J Lee, a Bitcoin evangelist who had been predicting that the price of Bitcoin would rise to $25,000 by the end of this year, has now slashed his forecast to $15,000.
However, all is not lost, according to data from the GTI Global Strength Indicator, which shows that Bitcoin is flashing as “oversold” for the first time since August, and is indicating that this is the most oversold the cryptocurrency has been since the beginning of this year.
Added to that technical measure is another one. Bitcoin is now testing its 23.6% 5-year throwback Fibonacci level, which was at $4,727, as its next support.
According to the co-founder of the to-be-launched (through an ICO) digital token Chia, Bram Cohen, it is always difficult to guess the short-term movements in cryptocurrency prices. However, it is most probably a lot of ICOs trying to liquidate their tokens for fiat currencies before the SEC targets them.