Even though Bitcoin has seen a fall over the past few weeks from its earlier price of nearly $20,000 per coin, altcoins have been on the rise almost constantly. Investors moving in to invest in altcoins reaped huge profits, producing a ripple effect that has seen newbie investors jump into the craze.
Speaking of Ripple (one of the most-watched altcoins), its position as the second best coin after Bitcoin seems to have been toppled according to CoinMarketCap, as it now has market cap of around 90 billion. This is down from over 140 billion a week ago.
This is certainly not the first a wave of volatility that has hit the market and by the looks of things, it will certainly not be the last. After all, cryptocurrencies are highly speculative as the market still remains unregulated. But what really causes these sudden drops in price?
Potential Headwinds and Media Hype
Whenever there are rumors about company partnerships or new developments that might add value to a cryptocurrency, there is usually a general rush to buy in so as not to miss out. For instance, immediately after rumors spread of Coinbase (one of the biggest cryptocurrency exchanges in the US) taking up Ripple on its GDAX exchange, the price of Ripple shot up to an all time high of $2.5 last week. It even continued past the $3.5 mark in a matter of days, as more news spread about the cryptocurrency’s massivegrowth. However, there have been recent developments in the crypto space with Coinbase denying the rumors of adding Ripple to its exchange, and CoinMarketCap excluding Korean exchanges from its averages and rankings. As expected, the price dropped, with Ethereum moving back into second place by market cap.
Growing Scrutiny and Regulatory Inspection
The rise and fall of cryptocurrencies has attracted a lot of attention. Government regulatory agents have vowed to step in and halt this volatility, and the level of scrutiny has increased over the years with some governments going as far as shutting down cryptocurrency-related bank accounts. South Korea, for instance, issued financial regulatory reforms that would see most cryptocurrency exchanges in the country pay taxes of up to one billion USD per year. Other countries that laid put down strict rules in an effort to regulate cryptocurrencies include China, India and Australia. Generally, the lack of support by governments has made many investors sceptical of the market, leading to fall in price. This is especially so in regions such as Asia, which control a large portion of the cryptocurrency market.
What do you think is the reason behind the drop in cryptocurrencies? Share your thoughts and opinions!