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Cryptocurrencies In Free Fall

Recently, Bitcoin and other digital currencies have suffered large losses a trend reversal or just normal fluctuations?

Investors, who are compensated for the higher risks with a higher return, know that capital markets are volatile. Particularly large price fluctuations had once again suffered the holders of crypto systems in the past few days. During a slide in the past two days, the Bitcoin price slid by at least 13 percent to $6405. By late Friday afternoon, the price then settled at $6436. Not only Bitcoin, but also other cryptocurrencies such as Ethereum or XRP came under pressure.

One theory for the resend downward trend could be the liquidation of large bitcoin positions by major investors. Mati Greenspan, senior market analyst at the social trading platform eToro, has a guess as to why billion dollar sales of Bitcoin have occurred. It is speculated that a bitcoin wallet, which presumably was part of the former Darknet black market Silk Road, has become active again after a long time and has caused a multi-billion dollar sale. But these are just rumors.

Lack of transparency

The second possible reason for the price decline could be due to the report published on Wednesday by Business Insider. It reported that investment bank Goldman Sachs had abandoned their plans to open a Bitcoin trading desk. Goldman Sachs denied that. Nevertheless, the market for digital currencies were effected.

But there are other explanations for the recent losses of the nearly 2000 digital currencies. Greenspan sees this in the strength of the American dollar, which many regard as a key currency more stable than the crypto investments, which are often regarded as a substitute currency. Another explanation is the announcement by Shapeshift, a well known digital currency trading platform, that it is introducing memberships. Initially voluntary, users of the platform must in the future specify their personal data in order to be able to act there. This was previously anonymous possible.

Lack of transparency was also the reason for the US Securities and Exchange Commission to refuse trading of index funds on Bitcoin and other digital currencies. In the specific case at the end of August, it was about the provider “Pro Shares”, which would have issued warrants on Bitcoin. The US authorities justified the refusal by stating that the Chicago Mercantile Exchange and Chicago Board Options Exchange erivatives exchanges on which the options were traded could not provide sufficient information about the identity of market participants.

Constant downtrend

The current price of Bitcoin has also reached the level of mid August. Therefore there is not any reason for concern. It is not a long term trend. The Turkish lira was partly more volatile than the bitcoin. Analyst Greenspan agrees: “Ten percent fluctuations are absolutely normal for the Bitcoin.” In recent weeks, the cryptocurrencies have been extremely stable. From Sandner’s point of view, the crypto market was overheated and a correction was necessary. He does not see a downtrend. The blockchain technology behind the digital currencies is still in the beginning. It could revolutionize the entire financial industry. But it also depends on the regulation of larger states.