Crypto Crash
Bitcoin dropped below $10,000 for a short time Wednesday (Jan. 17) as a selloff sparked by increased talk of government regulation spooked the market.
Over the last 24 hours, more than $36 billion of value was wiped off of the cryptocurrency. Other cryptos including Ethereum and Ripple also dropped precipitously. According to CoinMarketCap, Ethereum dropped below $1,000 Tuesday, falling more than 20%. Ripple fell almost 23% t to $1.08.
This kind of wild price swing isn’t unusual in the crypto market. As eToro senior market analysts Mati Greenspan told CNBC, “The action we’re seeing may seem dramatic but is really quite normal for this market. All in all, this drop has brought us back to the prices that were traded about a month ago for most coins.”
Bitcoin dipped below $10,000 for a short time on Nov. 30. But the market rebounded and the cryptocurrency climbed back up to the $16,000 range. Whether this is simply another dip on the roller coaster ride of volatility the characterizes crypto markets, or the bursting bubble many analysts have predicted remains to be seen.
A technical analyst at Coindesk says the price may fall to the $8,000 range.
Bitcoin’s drop started after South Korea Finance Minister, Kim Dong-yeon said the government was still considering shutting down crypto exchanges. South Korea ranks as one of the biggest cryptocurrency markets in the world. Dong-yeon called interest in Bitcoin an “irrational” investment craze.
According to Reuters, China is also talking crypto crackdown. A senior Chinese central banker reportedly said authorities should ban centralized trading of virtual currencies, and prohibit individuals and businesses from providing related services. In September, China prohibited trading cryptos on domestic exchanges and outlawed initial coin offerings.
The Street reported that the German Bundesbank also weighed in Tuesday, calling for international regulation. Board member Joachim Wuermeling warned that any moves to regulate the growing cryptocurrency craze would need global coordination.
Effective regulation of virtual currencies would therefore only be achievable through the greatest possible international cooperation, because the regulatory power of nation-states is obviously limited.”
All of this talk of government regulation may spook markets, but the feasibility of actually cracking down on a worldwide, virtual, decentralized currency is questionable. Think Markets chief strategist Naeem Aslam said he thinks all of the regulatory talk is mostly just talk.
It’s mainly been regulatory issues which are haunting (Bitcoin), with news around South Korea’s further crackdown on trading the driver today. But we maintain our stance. We do not think that the complete banning of cryptocurrencies is possible.”
As FXTM analyst Lukman Otunuga told Reuters, the sudden plunge is a stark reminder of the nature of the crypto market.
The sharp depreciation witnessed in Bitcoin today should remind investors on how explosively volatile and unpredictable the cryptocurrency can be.”
It seems certain governments will continue efforts to crack down, regulate, control, and tax Bitcoin. This isn’t to say there is no upside to cryptocurrencies, and a lot of people have made a lot of money on Bitcoin. But cryptocurrencies volatility also makes them risky.
At SchiffGold, we recommend a diversified approach to investing in Bitcoin. Buying gold and silver is a great way to diversify your cryptocurrency portfolio. You can even buy gold and silver with Bitcoin. In the world of investing, it’s never wise to put all of your eggs in one proverbial basket. Diversifying your cryptocurrency portfolio with precious metals can help mitigate some of the potential downsides and put you in an overall stronger financial position.
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