Crypto prices are in free fall, with the market crashing twice in just two weeks.
Last week, the cryptocurrency market capitalisation dropped by $26 billion in just 24 hours.
Bitcoin (BTC) fell over 11% in just 12 hours, plummeting through the $6,000 major support and hitting a one year low of $5,300, and the crypto's market cap fell below $100 billion for the first time since October 2017. This is nearly a 75% drop from December 2017's all time high of nearly $20,000.
On the same day, Ethereum posted an 10.5% loss as it fell to a 16-month low of just $163 - down over 80% from it's January high of $1,412.
In the last 24 hours, things have gotten worse, with Bitcoin plummeting from $5,300 to $4,500 - a drop of more than 17% - and it's total market cap has fallen to just $80 billion. Meanwhile, Ethereum fell to $133 - down 17% in 24 hours and 33% in a single week.
If we look at the market as a whole, no crypto is safe:
- BTC/EUR - down 17.05%
- BTC/USD - down 16.22%
- LTC/USD - down 12.21%
- LTC/EUR - down 13.60%
- ETH/USD - down 15.53%
- XRP/USD - down 14.26%
The total cryptocurrency market capitalisation is now down to $152 billion - its lowest since October 2017.
Source: Admiral Markets MT5, Accessed: 15 November 2018, 10:25 AM EET
Why did crypto crash?
On CNBC's 'Fast Money', BKCM founder and CEO Brian Kelly said the crash was triggered by Bitcoin Cash's hard fork upgrade. However, there are a range of factors contributing to this year's market volatility:
- Bad press, with several similar crashes this year since the highs of late 2017/early 2018 getting extensive media coverage (these crashes include a $15 billion drop in just two hours in June, a $13 billion drop in October, and this week's $26 billion drop)
- Security issues relating to how cryptocurrencies can be stored safely
- Government regulation concerns, due to Bitcoin being decentralised and the cyber security threats that entails, the world's governments have refused to adopt the currency
- Delay in SEC Bitcoin ETF decision in August, which is contributing to investors' concerns about the potential for further expansion of the market
- One publication has also argued that the crash was triggered by a sell off of cryptocurrencies by US taxpayers in an attempt to pay off capital gain tax on their holdings
Ultimately, the hard fork upgrade might have been the trigger, but it was just one domino in a chain of factors contributing to investor pessimism.
Is this the end for crypto?
The big question on many investors' and traders' minds is, is this the end for crypto?
If the negative sentiment from 2018 continues into 2019, it wouldn't be surprising for the crypto market to bottom out in the first half of the new year. However, some commentators are already predicting a turnaround, arguing that the US midterms and US debt could help the market rally towards the end of the year.
In any case, it is an exciting time to be trading!
How could traders take advantage?
The good news is that market volatility provides a range of trading opportunities. And, when trading CFDs on crypto cross pairs and cryptos paired with fiat currencies, traders can profit on market movements in any direction.
A trader who opened a short trade on just one lot ot BTC/USD, with leverage of 1:5, opening before the market fell at $6,189 and closing at the low of $5,300 would have made $889.
Source: Admiral Markets MT5, Accessed: 20 November 2018, 10:25 AM EET
Keep in mind that, while volatility does increase opportunity, it also increases risk. For this reason, it's important to have a risk management strategy in place before embarking on any trade.
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