Bitcoin had a bad weekend.
The cryptocurrency broke the $12,000 barrier on Saturday morning but fell soon after. At 13:57 UTC, bitcoin was trading at $10,532.75, down 8.59% from its price 24 hours ago. It was also a drop of 17.33% from its high of $12,740.81 on Saturday morning.
Other cryptocurrencies followed bitcoin’s lead. Among the top 10 most traded cryptocurrencies, Ripple was the biggest loser as of this writing. It was trading at $1.21, a decline of 17% from its price a day ago.
EOS, a smart contract platform that uses ethereum’s blockchain, was the lone outlier after bitcoin’s fall led to a corresponding decline for other cryptocurrencies. It pushed past the $14.08 mark yesterday. As of this writing, it is trading at $13.05 and is still up by 55% this year.
The overall market capitalization of cryptocurrency markets was $521.3 billion, down from a high of $579 billion earlier this morning.
India Cracks Down On Bitcoin Exchange Accounts
Over the weekend, India became the latest country in Asia to roil bitcoin prices when banks there froze eight accounts belonging to major bitcoin exchanges. According to reports, the banks were also planning to institute strict capital controls for others.
India is an important player in the bitcoin ecosystem, accounting for approximately 2% of all bitcoin mining operations. Its top three exchanges reported $62.5 million in revenue in the last year, a local publication reports. That may seem like an impressive figure until you consider that the exchanges report buy and sell operations as revenue. In some cases, they also conduct these operations on their own, a tax official said.
In addition to tightening controls on exchanges, the Indian government is also said to be considering applying a sales tax on bitcoin trading. Those numbers should help clarify the extent of bitcoin trading.
In the meanwhile, South Korean banks are estimated to have earned $2 million in commissions from promoting cryptocurrency accounts. (See also: South Korea May Tax Cryptocurrency Trades.)
What’s Driving Price Movement For Cryptocurrencies?
There is no conclusive answer to this question. Over the weekend and this morning, we have had a couple more predictions and theories that provide pointers. David Garrity, CEO of GVA Research, told Bloomberg that sentiment is driving the market.
“As of yet, we don’t have mass adoption of bitcoin for payment transactions,” Garrity said, adding that until a “killer application” emerges, the market for cryptocurrencies will be dominated by speculators.
Datatrek, a research consultancy, looked at bitcoin ownership (which is highly concentrated among few individuals) and its price action after the government shutdown last Friday (bitcoin’s price continued moving upward) to conclude that cryptocurrency markets are still struggling with price discovery.
“While bitcoin traders who bought on the shutdown headlines may have purchased at bad prices, their behavior highlights a belief that 'Stateless' currencies are a hedge against the political vagaries of state-sponsored stores of value like the U.S. dollar,” Datatrek wrote in a note.
Is A Decline In Transaction Fees Forthcoming?
Lightning network, which is being touted as a solution to decongest bitcoin’s network and reduce its transaction fees, has been deployed in more than 100 nodes across bitcoin’s blockchain. (See also: Is Bitcoin's Lightning Network A Game Changer?)
Some commenters on Reddit claim that transaction fees are down as a result. But that conclusion might be a bit misleading. There are other factors involved in determining transaction fees, such as volume of transactions (which, in turn, is also a function of trading volume) and node availability, that affect bitcoin prices. In fact, according to data from bitinfo.com, the number of transactions has been declining progressively.
It's All In A Name
Finally, it might be safe to assume that billionaire T. Boone Pickens will not be investing in cryptocurrencies anytime soon.
Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns small amounts of bitcoin.