Crypto Market Cap Is Down $600+ Billion From All Time Highs: What on Earth Happened?
What On Earth Happened? The Cryptocurrency Market Has Plummeted By More Than $600 Billion From Its Peak
The cryptocurrency market is going through, what can only be described as the most turbulent weather it's faced in a long time. This storm has culminated in one of the biggest drawdowns in value that it's ever seen, with even the most ardent ‘HODL' investors wondering if they should pull away or go all in.
As of January 7th, the total value of cryptocurrencies hit its high watermark when it came to individual values and complete market capitalization. During this period of time, the cryptocurrency market reached $829 Billion according to CoinMarketCap. To put this in perspective, the cryptocurrency market was bigger than Alphabet (GOOG), Microsoft (MSFT), Amazon (AMZN) and Facebook (FB).
Fast forward eight months on from what we see now as Crypto's ‘finest hour', the total market cap has plummeted by a total of $600 Billion, and even going so far down as to go below $200 Billion for the first time since November 2017.
On a crypto by crypto basis, this has resulted in major coins losing more than half of their value when compared to their highest points, with some going even lower, especially for Ripple, which saw one of its worst performances, falling by 89%. Meanwhile, Bitcoin, the world's most famous crypto, shed over 57% in value since January.
So here's the question: What on earth happened? And where did it go so wrong for Cryptocurrencies this year?
As the market steadily walked into 2018, the cryptocurrency market was on a rapid upwards trajectory; the value of Bitcoin has proven to be on some ‘hyper-bullish' trend, surging more than 1,000% since early 2017, and the general consensus felt like if you weren't on Bitcoin, you were on the wrong side of history.
“People were expecting great things heading into 2018,” said Charles Hayter, co-founder of CryptoCompare. “A lot of small-time investors were thinking if you can make money then why can’t I.”
It's this excitement that saw many analysts rush to stake a claim in the cryptocurrency gold rush, as they feverishly attempted to position themselves as masterly prospectors of the market. The managing partner of Fundstrat Global Advisors, Tom Lee, was one of the first to come forward with a bold Bitcoin prediction: stating that it would hit $25,000 by the end of the year.
Tim Draper was another who came forwards with bold claims about Bitcoin when he pronounced that a single coin would reach a staggering $250,000 by 2022. More recent analysts such as Marc Lasry, a hedge fund manager, believed that Bitcoin, with ample support from mainstream adoption, could trade as high as $40,000.
Let's not forget that the Cybersecurity master, John McAfee has his own bullish opinions of where Bitcoin will be in the future. Stating on a number of occasions that Bitcoin's value would reach $1 million. Now while that on its own sounds like a shining endorsement, it contains an infamous twist.
When I predicted Bitcoin at $500,000 by the end of 2020, it used a model that predicted $5,000 at the end of 2017. BTC has accelerated much faster than my model assumptions. I now predict Bircoin at $1 million by the end of 2020. I will still eat my dick if wrong. pic.twitter.com/WVx3E71nyD
— John McAfee (@officialmcafee) November 29, 2017
Regulation Just Isn't Moving As Fast As We'd Like It To
For regulatory bodies and major federal governments like the US, or specifically, Washington DC, the subject of regulation of digital assets is an economic and political minefield.
One of the biggest upsets for serious advocates for the cryptocurrency market, and blockchain as a nascent technology, is the ongoing delay of decisions centred around the creation of a Bitcoin-based Exchange Traded Fund (ETF) recently by the US' Securities and Exchange Commission.
One of the ealier casualties of the SEC's skepticism and hesitance have been Cameron and Tyler Winklevoss, whose overly-optimistic diagnosis of Bitcoin in their application to the SEC ended in disaster as it was rejected on two accounts recently.
Along with this upset, the SEC recently announced that it will be delaying its decision regarding a proposal by both VanEck and SolidX's Bitcoin ETF until September 30th. While the SEC is obligated to do so, the result was a bearish downturn for the crypto market.
A Bear By Any Other Name, Just Another Bearish Market?
While the cryptocurrency market is in one of the worst downturns it's seen in some time, it's still a bearish trend, and it's a situation that it, and the many investors behind it, are no strangers to. Given the nature of crypto, especially regarding its volatility and risk, this bear isn't the first, and it certainly isn't the last.
According to the founder of Morgan Creek Digital Assets, Anthony Pompliano, Bitcoin has experienced more than 13 drops, each shedding more than 30% of its value since 2012. Three of these slumps have also resulted in bigger drops of more than 50%, making this downtrend the latest in an extensive line.
Another analyst beleives that investors need to regain some perspective when it comes to the markets performance right now, because it's nothing new. “I believe we’re just witnessing the continuation of the cryptocurrency bear market. This is not the first or last cyclical asset to behave this way,” said Clement Thibault, senior analyst at Investing.com.
“Looking ahead, I don’t think we’re at the end of the cycle just yet, and I can see bitcoin and other cryptocurrencies continuing to fall before a meaningful return back up.”