If you’re a cryptocurrency investor, you’ll know that turbulence is just a part of everyday financial life. But we hope you’re strapped in and prepared for a rocky crash landing because crypto stocks just took an eye-watering tumble.
Bitcoin lost around 7% of its value and was trading below $6,300 (£4,700). Meanwhile, ethereum, ripple and bitcoin cash were hit even harder by the downturn, falling by 10% and 12%.
All in all, more than $600 billion has been wiped off the value of cryptocurrencies since a market peak in January.
Explaining the crash, David Sapper, COO at crypto exchange Blockbid, told ShortList: “Following the US stock market seeing its biggest drop since February, Bitcoin and fellow cryptocurrencies followed suit with $13 billion being wiped off the total cryptocurrency market value.
“There has also been suspicion of market manipulation being the cause of the price drop, with a single transaction of 15,000 BTC sent to an unknown wallet, with large single transactions having caused price fluctuations for Bitcoin in the past.”
So what should crypto investors do now? “The fact that cryptocurrencies have followed the US stock market could mean that there is some correlation between cryptocurrencies and the price of stocks, which is surprising seeing as previously Bitcoin and other cryptocurrencies were strengthened by the price drops in the US Stock Market,” Sapper said.
“However as a cryptocurrency exchange we do not like to speculate on price too much, so I would urge investors to do their research and decide for themselves. The SEC still have to decide on a Bitcoin ETF later this month which could turn prices into a positive direction if approved.”
Looking forward, Sapper thinks regulation and financial integration are the biggest questions for cryptocurrencies on the horizon.
“As we have seen in the past, price volatility and fluctuations are common place within the cryptocurrency market. Regulation and legislation are the real indicators for cryptocurrencies at this moment in time as institutional money and tier 1 banks look to get involved in the cryptosphere and these could be make or break for the crypto industry.”
The drop comes as financial authorities have issued warnings about how digital coins could pose a threat to the world economy.
“Continued rapid growth of crypto assets could create new vulnerabilities in the international financial system,” warned the International Monetary Fund’s latest World Economic Outlook report.
And last month the UK government branded the world of cryptocurrency a “wild west” and suggested oversight of the burgeoning industry be handed over to its primary financial services industry, the Financial Services Authority, according to Forbes.
Other high-profile crypto detractors include former PayPal CEO Bill Harris, who recently said he thinks the value of the cryptocurrency will continue to fall because “there’s just no value there.”
“The cult of bitcoin [makes] many claims — that it’s instant, free, scalable, efficient, secure, globally accepted and useful — it is none of those things,” Harris said on CNBC’s Fast Money.
“We’ve got digital currencies. And we’ve got digital currencies that are more stable, more widely accepted and have intrinsic value. We’ve already got it — it’s called the dollar, the yen, you name it,” Harris said.
“There has to be something underpinning it,” he said. “Bitcoin makes no revenue, no profitability.”