The cryptocurrency market is facing an intense sell-off as investors are rattled by heightened talk of regulatory scrutiny and infighting over a schism in bitcoin’s most notable spin-off, bitcoin cash.
At around 1:50 p.m. London time (8:50 a.m. ET), the total market capitalization of all cryptocurrencies — which is worked out by multiplying prices by the number of tokens in circulation — had fallen to around $138.6 billion, according to CoinMarketCap data.
That marks cryptocurrencies’ lowest level since September 2017, and a more than 80 percent decline — which translates to almost $700 billion — since the peak of over $830 billion their market value reached at the start of the year.
Prices were hit with an initial downturn last week, ending months of relatively stable trading for the world’s biggest and best-known digital asset, bitcoin — an unusual phenomenon for an asset known for its wild volatility.
That move came on the back of news that bitcoin cash’s blockchain — essentially a digital ledger with no central authority overseeing it — was set to be split into two, an event known as a “hard fork.”
Forks, which are essentially software upgrades, usually occur when there is a disagreement about how to scale a cryptocurrency to cope with a higher volume of trading, such as the August 2017 fork that led to the creation of bitcoin cash.
Last week’s fork saw bitcoin cash cloven into two new, separate virtual currencies, “Bitcoin ABC” and “Bitcoin SV” — short for “Satoshi’s Vision” — the latter being the brainchild of controversial entrepreneur Craig Wright, who claims to be bitcoin inventor Satoshi Nakamoto.
As a result, various cryptocurrencies fell, with bitcoin dropping below $6,000 and multiple other digital assets following suit.
Fast-track to Friday, and the world’s largest virtual coin is trading at a price of $4,300, down over 4 percent in the last 24 hours, according to CoinMarketCap. Meantime, XRP, a digital token associated with blockchain firm Ripple, dipped 6.7 percent to below 41 cents, while ether, the digital token of the Ethereum blockchain, fell more than 7 percent to just under $1.22.
The extension of losses for the market comes on the heels of a Tuesday report by Bloomberg News that the U.S. Department of Justice is investigating whether cryptocurrency traders used tether, a token founders claim is pegged to the U.S. dollar, and an associated trading venue called Bitfinex, to buoy the price of bitcoin.
Tether has proven to be a point of contention for the entire industry, given doubts around whether it holds enough dollar reserves to match the number of tether tokens in circulation. Tether claims it does.
The controversial token sank well below its dollar peg last month, dropping as low as 93 cents, as questions built up over its alleged role in driving bitcoin’s rally — which saw the digital coin soar close to $20,000 — last year.
But Mati Greenspan, senior market analyst at eToro, insisted the market was still driven by “technicals.” “The price (of bitcoin) is up more than 1,000 percent over the last three years, and after the great bull run in Q4 2017, what we’re seeing now is simply a pullback,” he said.
“In percentage terms, this type of pullback is quite normal for bitcoin and has happened many times since its inception.”
There have been a number of instances in which the price of bitcoin has been shown to have fallen steeply.
“There are many side stories in the crypto space right now some of them fairly complex, including the bitcoin cash hard fork, but none of them have any fundamental reasons to send prices down,” Greenspan said.
“In fact, (it’s) the opposite. The crypto industry is progressing at a rapid rate, blockchain projects are hiring and institutional players are getting ready to enter the space.”