Bitcoin Market Plunges from Record Highs to Multi-Month Lows
Forex traders in the United Kingdom have been following the cryptocurrency markets with eager anticipation. From a high of around $20,000 in December 2017 to the current price around $7,300 per unit on February 5, 2018 Bitcoin has plummeted in true bubble fashion. The cryptocurrency now has a market capitalization of approximately $122.6 billion, and a circulating supply of 16,847,650 Bitcoin. Recall that the maximum supply of Bitcoin will be 21 million units based on a complex logarithmic function. Over the past three months, starting Sunday, November 5, 2017, Bitcoin was priced at $7,471.06 barely $100 more than the current price today. In the interim, Bitcoin hit $20,078.40 on Sunday December 17, 2017. The precipitous decline since then has seen hundreds of billions of dollars wiped off the cryptocurrency markets. Today, the total market capitalization of all cryptocurrency is $338.741 billion, a far cry from the near $800 billion+ at its zenith.
UK traders have been actively buying and selling digital currency, in anticipation of quick profits, much like traders around the world. The world’s leading cryptocurrency trading platforms including Coinbase, Bitstamp, and BitFinex have seen dramatic increases in company valuations, but overall trading volumes have declined sharply in January and February 2018. Bitcoin still retains market dominance with 36.2% of market share. There are currently 1,513 digital currencies across 8,569 markets. Ethereum ranks second at a price of $717.95, and a market capitalization of $69.95 billion. There are 97,430,178 Ether tokens circulating. Ripple is third at a price of $0.712644 per unit, and a market capitalization of $27,799,683,612. The current circulating supply is 39,009,215,838 XRP.
What is Driving the Bear Markets in Digital Currency?
The current bear markets are being driven by multiple factors, notably decisions taken by the Chinese government to block local traders from accessing overseas websites for ICO investment purposes, and cryptocurrency trading. The prohibition of digital currency trading in China began a year ago but has recently increased. Overseas websites that target Chinese users are now the focal point of Chinese lawmakers. Offshore cryptocurrency trading platforms are now being shut down by China, and regulatory measures are in the pipeline. The current bear market has been coming in waves, with short bursts of upside potential being drowned out by strong downward pressure. There is a belief that the deflation in prices is creating a value proposition for cryptocurrency. The December highs were brought about by frenzied buying behaviour among users, but that has subsequently died down.
Other factors impacting demand for BTC and other cryptocurrency come from major banking organizations such as Citigroup, Bank of America, JPMorgan Chase etc. Now credit cards issued by these banks will not be permitted at cryptocurrency trading platforms. The prohibition of cryptocurrency purchases by these big banks will curtail the runaway prices on these digital assets as banks scramble to maintain a dominant position in the financial transactions arena. The performance of Bitcoin has mirrored that of the Tulip boom in the 1600s. The Tulip and bulb craze of the 1630s saw people putting their life savings in flowers, ramping up the price of these assets. Some people went as far as leveraging their homes for flora and soon the market crashed and value was eliminated. Much the same has happened with digital currency which is not tied to anything concrete.
Is Digital Currency One Big Pyramid Scheme for ICO Enterprises?
Even in India, the Finance Minister announced that the Indian government does not consider cryptocurrency legal tender or coin, and will eliminate the use of digital assets in financing illegitimate activities or as a payment system. Nonetheless, the technology underpinning digital currency is alive and well. Smart contracts, and blockchain technology are increasingly being adopted by companies like American Express, Moneycorp and other entities to move money across borders in a fraction of the time, and at a fraction of the cost of traditional banking methods. The UK is a major market player in the speculative arena and will be keenly eyeing the price movements of digital currency.
Do you believe that Bitcoin, Ethereum and Ripple are part of a craze that has no practical application in the world today? Are people simply buying a bunch of 1s and 0s, or is there something concrete in this technology and these digital assets?
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About Brett Chatz
Brett Chatz is a graduate of the University of South Africa, and holds a Bachelor of Commerce degree, with Economics and Strategic management as his major subjects. Nowadays Brett contributes from his vast expertise in online trading for iForexTrader.co.uk.