All major digital currencies have seen considerable price drops this week. Bitcoin, the world’s biggest digital currency, fell through $8,000 on Tuesday and then moved below the $7,500 mark on US exchanges on Wednesday, its lowest price for more than a month.
In other Wednesday trading, Ether and Ripple lost more than 10% and Litecoin more than 8%, with crypto market data site, Coinmarketcap, estimating that the total value of all coins fell on Wednesday to around $325 billion, down by more than $50 billion in just 72 hours.
Some commentators are arguing that this week’s sharp falls are market consolidations, after Bitcoin and other crypto-currencies saw steady gains from early April through to early May. However, others are pointing to uncertainty in the high-volume Seoul markets, after South Korean prosecutors raided the country’s biggest cryptocurrency exchange, Upbit, on May 11, because of suspicion of fraud. The Upbit raid came after executives from other South Korean crypto-currency exchanges were detained in April in connection with the alleged embezzlement of billions of Won.
Another cause for market jitters would be the announcement two days ago from “Operation Crypto Sweep”, the joint American and Canadian state-level regulatory task force. Crypto Sweep says it has so far launched 70 investigations into potential crypto-currency scams and fraudulent ICOs in 40 jurisdictions across North America, and that this is “just the tip of the iceberg”.
Jay Clayton, chairman of the federal-level US Securities and Exchange Commission, yesterday praised Crypto Sweep, saying the enforcement actions “should be a strong warning to would-be fraudsters in this space that many sets of eyes are watching, and that regulators are coordinating on an international level to take strong actions to deter and stop fraud.”
While some analysts remain stoically bearish – with Fundstrat’s Tom Lee telling CNBC that Bitcoin “in a handful of days” will reach $25,000 – many others are far more pessimistic.
US financial writer Jani Ziedins wrote in his blog yesterday that he thinks there are many more price drops to come. “It takes most bubbles between six and 24 months to finish bursting. If Bitcoin is like most bubbles, that means the worst is still ahead of us and we should expect lower lows over the next few months,” wrote Ziedins. “Last week’s $9k support has turned into this week’s $8k support. And thus far it is giving every indication that $7k will become next week’s support. I hope you see the trend here.”