This week has been a tough one for the cryptocurrency markets, as these currencies face what could be their first significant test. Many cryptos declined well into double digit territory this week, and several have thus far not been able to make a substantial bounce. Prices do, however, appear to be trying to stabilize after this week’s multi-day rout.
According to a recent article by marketwatch.com, cryptos were sold off this week primarily due to the notion of South Korea and China both clamping down on crypto trading, with some even suggesting the possibility of the countries even banning trading of crypto.
According to the article, the head of the South Korean Financial Services Commission told parliament this week that the government may close “all local virtual currency exchanges or just the ones that who have been violating the law.”
Also in the news this week was more discussion of additional crypto-based financial products. A Wall Street Journal article discussed some of the potential issues. The SEC sent a letter to Wall Street trade groups this week, highlighting its views on the trading of cryptos. The regulatory body expressed concern over market volatility, lack of liquidity and investor protections, and seemingly shut the door on the idea of crypto-based ETFs or other related products-at least for now.
This should really come as no surprise as these currencies become increasingly popular. With that rising popularity, regulators will likely to continue to monitor the markets carefully and may even look to put additional regulations into place.
Bitcoin: Bitcoin really took it on the chin this week. The currency declined from well over the $14,000 level to under $10,000, and has since seen a bit of a bounce, trading for around $11,500 as of this post. This market needs to see a more significant bounce very soon, or more selling could take place dragging prices sharply lower once again.
Bitcoin Cash: Bitcoin Cash did not have a good week either. This crypto saw prices decline from almost $2,600 to under $1,400. Like Bitcoin, the selling was driven by the notion of increased regulation and the potential for exchange shutdowns.
Ethereum: Ethereum did not do any better this week, seeing sharp declines during the week as more news broke. The market does, however, remain in a firm uptrend on the daily chart, and buyers could potentially look to step in en masse after this week’s selling.
Ethereum Classic: Ethereum Classic dropped from around the $42 level to less than $24 before seeing buyers step in. The market has seen a sizable bounce from this week’s lows, and is currently trading for almost $33. The daily chart for this crypto does not look as encouraging, and more selling could potentially do significant chart damage.
Litecoin: Litecoin also succumbed to the selling pressure this week, although it’s sell-off was considerably more muted compared to other currencies. The market has been trading right around the $200 level the last few days, and like other cryptos, may need to see more buying come in to avoid another large scale sell-off.
Ripple: Ripple had a crazy week! This currency declined from over $1.80 to less than a dollar. The market had no trouble finding investors willing to step in, however, and has seen a massive bounce back to the $1.64 area. The currency saw extreme volatility this week, and part of that volatility may be due to the relatively low value of Ripple.
The next week or two may be very significant for the cryptocurrency markets. If more buyers do not step into these currencies-and quickly-another rout could potentially be seen. In addition, these markets will remain vulnerable to fresh news-especially regarding regulatory affairs-and could see heightened volatility as they become increasingly popular and trading volumes increase.
South Korea, China and Russia may all be special areas of concern for the crypto markets, as all have expressed concerns over trading and the desire for increased regulation. This trend could potentially spread, and more nations could scrutinize crypto trading. While regulation could potentially have a large impact on active trading, it may not, however, do much to dissuade long-term investors looking to capitalize on the potential of these markets.