Prices for cryptocurrencies tumbled this week as governments around the world closed ranks and threatened to impose regulation on their trading.
Most digital currencies hemorrhaged their gains from the last weeks of 2017, when the entire market swelled to record valuations on the back of increased traction and trader enthusiasm.
Cardano’s ADA, a cryptocurrency that has risen by more than 1500% since the end of November, is the biggest loser this week. It has shed 38% of its value from the beginning of this week based on its price at 19:52 UTC. (See more: Cardano Aims to Create a Stable Cryptocurrency Ecosystem.)
Other major losers were ethereum and Ripple. On an overall basis, however, ethereum is up by 45% since the beginning of this year. China-based NEO – which is mostly unchanged from its price at the start of this week as of this writing – has made even more impressive gains, rising by more than 95% since the start of 2018.
Not surprisingly, the overall market cap for cryptocurrencies lost more than $300 billion value by Wednesday. It has since recovered to $564.5 billion. (See also: Bloodbath In Crypto Markets As Governments Threaten Regulation).
But the jury is still out on whether this is the long-anticipated correction in bitcoin prices. “When we talk about a correction here, really, all we have done is go back to the all-time highs that we set six weeks ago,” argued Spencer Bogart of Blockchain Capital. “So it hasn’t been much of a correction yet.”
Others said the price decline was part of the bitcoin story. Analysts have predicted a further decline in prices before an uptick. (See also: Bitcoin Price Stalls As Analysts Predict $25,000 Price Target By Year End.)
The cryptocurrency also passed a milestone this past week, when the 16,800th coin was mined. That means only 20% of all bitcoin planned for its existence remain to be mined. (See also: Only 20 Percent Of Bitcoin Remain To Be Mined).
Overheated Trading Triggers Alarm
In the meanwhile, a regulated bitcoin is fast becoming an eventuality as governments around the world cited overheated trading and excessive speculation as justification to regulate bitcoin. The week started with China and South Korea threatening to impose regulations on cryptocurrency trading and ended with France and Germany announcing plans to introduce a joint proposal to regulate bitcoin at the G20 summit later this year.
Regulation might not be such bad idea for bitcoin and cryptocurrencies since it would bring in more more investors and accountability to malpractices at exchanges.
According to a paper released earlier this week, fraudulent trading was responsible for bitcoin’s price rocketing from $150 to $1,000 in a couple of months back in 2013. According to the paper, trading by two bots spiked trading volumes which, in turn, brought more traders onto Mt. Gox, the Japan-based exchange that crashed in 2013. (See also: Fraudulent Trading Drove Bitcoin's Price From $150 To $1,000 In 2013: Paper)
The first bitcoin futures contract was settled this week. While volumes and market participants have mostly remained low, there might be more institutional investors making their way into cryptocurrencies. NYSE owner Intercontinental Exchange (ICE) has said that it plans to introduce a new feed for hedge fund and high-frequency trading customers. The feed will display bitcoin prices from 15 different cryptocurrency exchanges throughout the world.
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