Cryptocurrencies were back on the defensive Monday, with nearly all major tokens declining sharply following upward consolidation over the weekend. After amassing significant fortunes, speculators appear less keen to re-enter the market due to perceived regulatory risks and possible collusion between Bitfinex and Tether.
Cryptos Resume Downtrend
The cryptocurrency market’s total capitalization has fallen by around $50 billion over the past 24 hours, with losses spread across most major coins. The market reached $456 billion early Sunday before reversing all the way back down to $381 billion. At the time of writing, the market cap was $397 billion.
Interestingly, the latest string of losses has allowed bitcoin to recover some lost market share. The original blockchain now accounts for 35.3% of the total market, up 2 percentage points from Feb. 1.
The reversal on Monday was led rather uncharacteristically by Ethereum, a coin that had staved off the worst of the market downtrend since mid-January. Ether bottomed out at $781, its lowest since the Jan. 17 price collapse. At the time of writing, ether had consolidated at $825 for a loss of more than 7%.
Bitcoin, Ripple XRP, bitcoin cash and Cardano were each down at least 9.8%. The only coin in the top-100 to report gains was Revain, according to data provider CoinMarketCap.
The Future
The crypto market has been on a roller coast the past two months, with the last three weeks representing the long descent from peaks north of $830 billion. Until recently, speculators had bought virtually every dip going back to the start of 2017. Even the September collapse that followed China’s decision to ban cryptocurrencies was quickly bought by investors betting on a price revival. That hasn’t been the case these past three weeks, with the exception of a few weekend rallies that quickly fizzled out.
Of course, the outlook is much different for long-term holders of cryptocurrencies – a segment of the market that is invested for philosophical as well as monetary reasons. Despite the horrible month cryptos are having, the general consensus appears to favor a continuation of last year’s rally. These aren’t fringe voices, either.
Last week, the head of GVA Research LLC told Bloomberg he believes bitcoin will return to $20,000 by the forth quarter. In January, the vice president of Saxo Bank said bitcoin could hit $100,000 this year. Kay Van-Petersen, the analyst in question, successfully predicted last year’s surge.
In terms of predicting a bottom, Nick Colas of DataTrek said in December that bitcoin could reach a low of $6,500 this year. He also believed a rally to $22,000 was possible. Colas has been quoted by Bloomberg, Barron’s, The Wall Street Journal and Market Watch, among others.
Even with a bullish long-term outlook, investors are still forced to grapple with uncertainty in the here and now. It recently came to light that the U.S. Commodity Futures Trading Commission (CFTC) subpoenaed Bitfinex and Tether, companies that were later found to be under the same CEO. Although the nature of the summon isn’t known, some are speculating that Tether is printing more tokens to drive up the value of bitcoin on Bitfinex. The company increased the circulation of its USDT tokens by 850 million in January and 9,000% over the past year. USDT is allegedly pegged to the dollar.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.
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