This year hasn’t been particularly great year for cryptocurrencies. The Ripple, Ethereum, and Bitcoin prices were stable for the last few weeks, but they have become incredibly volatile this week. Bitcoin and other major cryptocurrencies witnessed a sudden decline in their prices on Thursday, knocking billions of dollars off their value. The decline on Thursday pushed Bitcoin prices closer to its lowest level this year, which was around $5,800 in July. And the prices fell again on Friday.
Cryptos nosedive again on Friday
After having fallen 4.26% on Thursday to $6,289, Bitcoin declined further on Friday morning to trade at around $6,278. Bitcoin had earlier been trading at around $6,500 for the last several weeks. Cryptocurrencies have lost more than $600 billion in their value since the market peaked in January this year. Bitcoin prices peaked in late 2017 to almost $20,000. The digital currency has seen intense volatility and losses since then.
According to CoinMarketCap.com, the total market value of virtual currencies has declined by nearly $7 billion in the last 24 hours. Early on Friday, Ripple (XRP) plummeted 7.9% compared to Thursday to trade at around 39.13 cents. The decline came after a massive sell-off on Thursday. Ethereum was also in the red, falling 7.4% to $191. Amid the bloodbath, cryptocurrencies are showing no signs of recovery. Bitcoin Cash, Litecoin, Stellar, and EOS have also fallen sharply.
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Three of the most popular cryptocurrencies -Bitcoin, Ethereum and Ripple – are all trading far below their record high levels. Tom Lee of Fundstrat told CNBC he was surprised people believe virtual currencies would never reach their all-time highs again. Lee pointed out that there are only about 50 million cryptocurrency wallets today. By comparison, there are more than four billion Visa cards. There is still massive growth opportunity ahead of cryptocurrencies, believes Lee.
Why are Bitcoin prices falling?
Regulators and financial institutions haven’t been particularly fond of virtual currencies. The decline on Thursday and Friday was likely due to criticisms from the International Monetary Fund. The IMF said in a recent report that cryptocurrencies have immense profits possibilities, but they pose a great risk to the global financial system. Virtual currencies also demoralize cross-border payment infrastructures. The IMF said the rapid growth of crypto assets would create “new vulnerabilities in the international financial system.”
Economist Nouriel Roubini, who predicted the 2008 financial crisis, has also warned about virtual currencies. During a hearing with the US Senate Committee on Banking, Housing and Community Affairs on Thursday, Roubini said, “Crypto is the mother or father of all scams and bubbles.” He has been bearish on digital coins for a long time.
Another thing that could have triggered the decline in Ripple, Ethereum, and Bitcoin prices was the activity of the so-called ‘Whales’ in the market. On Thursday, about 22,000 Bitcoins were moved to an unknown account. Experts speculate the Whales might have carried out the transaction, which created panic among crypto traders and investors. Such large transactions cause the market rate to move in the direction of the sale.
Experts have expressed concern that the Ethereum, Ripple, and Bitcoin prices could continue declining over the next few weeks. Regulators from around the world are still exploring whether to add digital coins into the existing financial systems. It could dramatically change the way money flows. Countries such as the United Arab Emirates want to become a global hub for digital currencies while China has banned Bitcoin mining to protect its existing financial system.
In the United States, the Securities and Exchange Commission (SEC) is still considering whether to approve a Bitcoin exchange-traded fund (ETF). Crypto bulls are also looking forward to the launch of Bakkt platform next month. Bakkt is created by NYSE owner ICE in collaboration with Microsoft, Starbucks, and Boston Consulting Group.