The cryptocurrency market shaved over $100 million in a 48-hour period. The sell-off was predominantly due to bitcoin prices falling below $32,000. The digital coins hadn’t seen a price that low since January 11.
The downward spiral seemed to come after Treasury Secretary Janet Yellen sent out a warning to curtail the use of cryptocurrencies, citing that the alternative coins are “mainly for illicit financing.”
Yellen is a former Federal Reserve chairperson and said that money laundering often occurs through cryptocurrency channels.
Since then, cryptocurrency shares have plunged. In particular, Bitcoin has lost more than 10 percent of its market cap in a 48-hour span, effectively erasing billions from the market. On Thursday, bitcoin shares fell by 8 percent to $31,007. By Friday evening, it had rallied higher to $33,567.50. The world’s original cryptocurrency had seen trading of as much as $41,940 in early January. But, by the following weeks, its shares took a nosedive, and bitcoin has continued to see heavy volatility in trading. There’s still some good news for bitcoin, however. Trading for the virtual coin is still up by 140 percent for the past three months. And on Wednesday, investment management firm BlackRock said that it had filed separate prospectuses for two funds that are interested in purchasing futures contracts. It would be the latest move by an institutional investor to show interest in bitcoin. BlackRock has $7.8 trillion of assets under its management.
Michael Sonnenshein said it’s likely a natural correction. “Corrections are a natural part of any market and are especially natural in the bitcoin ecosystem. From 2016-2017, we experienced six corrections of approximately 30% or more on the way to new highs.” Sonnenshein is CEO of Grayscale Investments, a New York-based cryptocurrency firm.
Bitcoin isn’t the only digital currency to see its market cap fall. Ether, the second-largest cryptocurrency, was also down by nearly 9 percent and had fallen to $1,182 after hitting a record of $1,439 Tuesday. By Friday afternoon, Ether had recovered some of its losses and stood at $1,253.20.
As of Thursday morning, the total market value of all cryptocurrencies was around $918 billion. Two days before that, it was approximately $1.07 trillion.
Sonnenshein said, “Who’s to say whether we’ve seen the bottom of the correction, but at Grayscale, we know that there continues to be a flurry of demand, especially from institutional investors who have longer term holding preferences.”
Some critics, however, say that bitcoin could just be a bubble waiting to happen.