The slump, which began last week, has only intensified in the past 24 hours with major digital coins such as Ethereum, Ripple, and Bitcoin Cash losing over 20 percent each in value, on a daily basis. Since January 15th, the market cap of crypto coins has fallen from over $700 billion to about $500 billion in about 48 hours. However, it has since shown some signs of recovery with the market cap moving back up to to $530 billion from $450 billion.
Bitcoin Has Also Been Hit Hard
Claims going around that Bitcoin has not been affected much by this slump are not true. This is because the largest cryptocoins recorded the largest losses in value, when compared with the small altcoins. In the last few hours though, Bitcoin has lost less than Ethereum, Bitcoin Cash, and Ripple. However, it has lost a lot of value in the past few weeks; about 15% in value. Since December, it has dropped from a peak of almost $20,000 to about $11,000 right now.
There are also claims that the ban on cryptocoin trading in China and South Korea has had a major impact on the market cap of cryptocoins. However, that is not true; the ban in China went into effect in September 2017. At the time, prices continued to rise. Also, the volumes of trade in China are almost zero, which means it has almost no impact on Bitcoin trading.
Most investors are quite jittery about the current slump of the cryptocoin market. However, it is worth noting that corrections of 20 to 30 percent are quite common in the cryptocoin world. For instance, the People’s Bank of China and Chinese authorities banned ICOs in the country. At the time, Ethereum saw its price dip by about 30 percent.
Two months prior to this, Ethereum experienced a 50% dip from about $360 to $134. Thus, with this history in mind, it is safe to assume that the price could correct itself in a just a few months or weeks.
This Correction was long overdue
When the valuation of cryptocoin market broke the $500 billion mark, Buterin, the creator of Ethereum, expressed concern about the market cap of most projects. He questioned whether enough had been done to allow for such a huge market cap for cryptocurrencies. Buterin agreed that cryptocoins had done quite a lot for the public, but he was not convinced that it was enough to justify such a high price.
Buterin was quoted as saying,
So total crypto coin market cap just hit $0.5T today. But have we earned it? The answer to all of these questions is definitely not zero, and in some cases, it’s quite significant. But not enough to say it’s $0.5T levels of significance. Not enough.
This ongoing correction is actually good for the market. It is especially so when you consider that it has been overflowing with projects that are of little value in recent weeks. Some projects with little real-world applications have gained value in billions of dollars.
What do you think about this slump? Will it end soon? Leave us your thoughts in the comment section below.