Cryptocurrency prices have been relatively calm for the past few months, but that all changed on Wednesday. Leading cryptocurrency bitcoin suddenly plunged below $6,000 to its lowest level of 2018, and most other digital assets followed suit.
Here's why the volatility has suddenly returned to the cryptocurrency markets, where the largest cryptocurrencies stand, and whether the upward momentum that we saw in 2017 could return anytime soon.
Cryptocurrency prices
After relatively low volatility for the past few months, bitcoin and most other cryptocurrencies took a sudden dive on Wednesday. In fact, all of the top 50 cryptocurrencies by market cap (except for those pegged to the U.S. dollar) are in the red for the past week. Here's a look at the 10 largest.
Why is the cryptocurrency market plunging?
According to several cryptocurrency experts and industry professionals, the decline has to do with a so-called "hard fork" scheduled for today in bitcoin cash.
If you aren't familiar, a hard fork is similar in principal to a spinoff in the stock market world. One cryptocurrency essentially splits into two that each function independently. Cryptocurrency insiders like to think of hard forks as upgrades. In fact, bitcoin cash itself was a result of a hard fork of the bitcoin blockchain in 2017, with the idea that the network would be more scalable than standard bitcoin.
The bitcoin cash hard fork actually occurred today (Thursday, Nov. 15) just a few hours before this was written, and the cryptocurrency split into Bitcoin ABC, which is the core bitcoin cash token, and Bitcoin SV, which is the new asset being created. In a nutshell, Bitcoin SV quadruples the block size, meaning that the network will be capable of handling greater transaction volumes.
Without getting too technical, there's a disagreement in the cryptocurrency community on the direction of the bitcoin cash currency, so there are worries that the market could be somewhat chaotic after the fork is completed. Investment markets dislike uncertainty in most forms, so that could certainly explain why most cryptocurrencies are under pressure.
It's been a rough 2018 for cryptocurrencies -- where will we go from here?
Although bitcoin and most other major cryptocurrencies have been relatively stable for a few months, 2018 has been a terrible year for these digital assets so far. Just take a look at how bitcoin and some of these other major cryptocurrencies have fared since this article from Dec. 26, 2017 -- and that wasn't even the peak.
There are several potential reasons for the poor performance. Most obviously, new money seems to be flowing into cryptocurrencies to a lesser degree than during the rise. There are also legitimate regulatory questions in the U.S. and international markets. And, despite repeated attempts to bring a bitcoin ETF to the marketplace, the Securities and Exchange Commission has yet to approve one. Finally, the adoption of bitcoin and other cryptocurrencies as a means of payment hasn't really advanced as much as many speculators would have liked.
In short, the cryptocurrency markets have been in "wait-and-see" mode for a few months now. And until a compelling positive catalyst (like an ETF approval) occurs, bitcoin and the other major cryptocurrencies could have a tough time climbing.
Source found below:
View on Parley
What is Parley?
Parley is a Steem-based Reddit competitor that allows users to submit links and curate news they find around the web in order to promote discussion on the Steem platform. Read more