Bitcoin, ethereum, Ripple’s XRP, bitcoin cash, litecoin and chainlink—the biggest cryptocurrencies by market value—have fallen sharply after rocketing higher through November.
The bitcoin price lost $3,000 in a matter of hours yesterday, dropping over 10% from near its all-time highs of almost $20,000 per bitcoin—while ethereum, Ripple’s XRP, chainlink, bitcoin cash and litecoin, all saw similar retractions.
The sudden sell-off wiped around $50 billion from the value of the world’s combined cryptocurrencies and has left bitcoin and crypto traders fearful a further drop could be on its way.
Bitcoin’s massive rally over the last few weeks, beginning shortly after PayPal announced it would begin offering bitcoin buying and spending services, saw the bitcoin price climb around 60% to brush its 2017 all-time high.
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The bitcoin bull run sparked a surge in the price of ethereum, Ripple’s XRP, litecoin and chainlink—known as alt coins—as investors rushed into the cryptocurrency space. The price of Ripple’s XRP more than doubled in under a week.
“For the past few days, the market was in a slightly febrile mood as it waited nervously to see if bitcoin would pass the magic $20,000 barrier,” Sui Chung, chief executive of CF Benchmarks, a crypto indices provider for CME and Kraken Futures, said via email, pointing to Malta-based bitcoin and cryptocurrency OKEx resuming withdrawals after a month-long hiatus caused by one of the exchange’s key holders being held by Hong Kong authorities to “assist an investigation” as exacerbating the sell-off.
“Most of the frozen bitcoin had traded up around 70%, so there were a lot of unrealised profits locked up there,” Sui Chung said. “Once these coins were free to move it’s likely many traders sold them for dollars and stable coins to realise those gains, adding greater momentum to the selling.”
Despite bitcoin’s sudden sell-off, many in the bitcoin and cryptocurrency community remain upbeat about bitcoin’s prospects, emboldened by a year that’s seen bitcoin’s reputation as digital gold find fresh support and renewed interest from Wall Street and big-name investors.
“The global macro environment has made bitcoin increasingly prominent as a potential hedge against the traditional banking and financial system,” Vijay Ayyar, head of Asia Pacific and Luno Exchange at Digital Currency Group-owned Luno, said via email.
“The narrative of bitcoin as a safe alternative to traditional finances is being established without a doubt. Gold is starting to become less relevant especially for the younger population and investors and this shift from gold to bitcoin has just begun.”
Bitcoin’s rally toward its all-time high was given a boost last week by an executive at BlackRock
, the world’s largest asset manager, who said bitcoin could one day replace gold.
“Do I think [bitcoin is] a durable mechanism that could take the place of gold to a large extent? Yeah, I do, because it’s so much more functional than passing a bar of gold around,” BlackRock chief investment officer of fixed income, Rick Rieder, told CNBC.
The bitcoin and cryptocurrency industry are almost universally predicting this latest downturn will be short-lived, with many using bitcoin’s price performance over recent years as evidence the rally will resume.
“I believe that this bull run will continue, with bitcoin peaking at $30,000 by the end of 2020 and more gains to be expected next year,” Philippe Bekhazi, chief executive of payment and FX exchange platform Stablehouse, said via email.
“We predict that bitcoin will peak at the end of this year at around $40,000,” added Chyna Qu, chief operating officer at decentralized loan network DeFiner, pointing to bitcoin’s planned supply cut earlier this year and the rise of decentralized finance.
“The more attention the industry gets, the higher the price of bitcoin, the more people want to get involved. All of this constantly pushes up the price.”