This week started on a good note for Bitcoin as everyone was waiting for the CME bitcoin futures contracts to go live. Just a day before the launch, Bitcoin was seen surging to new highs confidently and touching its all-time high of $20078.40 on Dec. 17, according to CoinMarketCap. On the next day later of Dec. 18, the CME Bitcoin futures opened straight away above $20000 with nearly 200 contracts with the January expiry being sold just in the first hour of trading.
However, the momentum could not continue for so long as bitcoin has entered into a correction mode and it seems that there is a massive sell-off going on in the past 24-hours. At the press time, Bitcoin is currently trading at $13,485.90 and is down by 21% in a day’s time. This means that that from its record peak, Bitcoin has corrected more than 30% in a week’s time itself. The existing market for the cryptocurrency is $231 billion and the 24-hour trading volumes are above $18 billion.
Shane Chanel, equities and derivatives adviser at ASR Wealth Advisers in Sydney said: “Keep in mind that bitcoin has gone up a lot this year, so a correction is always likely. A lot of the capital is flowing from bitcoin into alternative coins. You’ve seen companies like Verge and Ripple, which are over 400 percent in the last week.” Chanel’s words are true as we have Ripple surging to a record-high of $1.37 in the past 24 hours, and is currently trading at $1.04 according to CoinMarketCap.
There have been continuous warnings from many analysts in the past fifteen of a major correction in the Bitcoin price. Stephen Innes, head of trading for Asia Pacific at Oanda Corp said that this fall is a “reality check” for the investors. He further stated “At the heart of the matter was a frenzied demand for coins with limited supply has now led to unsophisticated investors holding the bag at the top.”
One of the major reason which is attributed to this fall is that bitcoin derivative – Bitcoin Cash (BCH) – is emerging as a strong player in the market more specifically after the cryptocurrency was recently registered on the largest U.S cryptocurrency exchange – Coinbase. Following this news, the price of Bitcoin Cash surged by over 70% in a single and there were also reports of possible insider trading which the exchange has said that they will be investigating the matter at hand.
Also, another major reason which is accounted for the fall and can further pull down Bitcoin is that five of South Korea’s Bitcoin Exchange have become vulnerable to attacks. This includes the popular exchange Bithumb. this was confirmed by a South Korean media outlet MBC hired a security firm to test the security of the exchanges. It has been found that hackers can easily circumvent the security procedures by using “basic hacking tools” as described by the security team. This puts a great risk on a lot of user data and funds.
Rapid Bitcoin volatility is not a new thing for the investors and this is why few analysts consider Bitcoin trading as nothing else but gambling. Takashi Hiroki, chief strategist at Monex Securities in Tokyo said “Trading in bitcoin is akin to gambling, so its movements don’t follow logical patterns. Unlike equities and bonds, it is not possible to calculate expected returns on bitcoin, so buying it becomes a gamble rather than an investment.”
Currently, apart from just Bitcoin, there has been an overall euphoria in the crypto market with altcoins like Ethereum, Litecoin and Ripple contributing with huge strength. Just before this correction, the cryptocurrency market cap surged above $600 billion.