Cryptocurrencies such as Bitcoin, Ethereum, Ripple and several others have seen unprecedented growth in their values in the past few months, but over the past 48 hours, also saw a steep loss in their value averaging at an overall 18 percent.
Two of the biggest crypto currencies stood to suffer the most with Bitcoin dipping by 16.5 percent in value and its competitor Ethereum by 23.5 percent in the past few days, according to a TechCrunch report.
According to coinmarketcap.com, Bitcoin’s rate on September 3 was $4928 and on September 5 it dipped to $4040 — an 18 percent drop in value. Similarly, Ethereum’s rate on September 1 was $386 which dipped to $294 by September 5.
Out of the top 100 cryptocurrencies listed by the website, only one-fifth of them saw any growth over the past 48 hours, with the rest taking a hit.
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Total market cap of the Bitcoin market fell from $176 billion on Saturday to $141 billion on Monday — an overall 20 percent decline.
Although the value of Bitcoin still remains double of what it was a few months back, this overall decline in the market cap is surely alarming for the crypto currency market.
What Caused the Market Crash?
Is it China Banning ICOs?
One of the major reasons that could’ve caused this crash is China’s ban on new (cryptocurrency) companies which are raising money using cryptocurrencies called Initial Coin Offering (ICO).
Such government sanctions have the power to make a dent in the market. The Chinese government directed all ICOs to return the acquired funds to investors citing that these ICOs are causing a serious disruption in the economy and financial situation of the country.
China-based cryptocurrency, NEO, declined in value by over 50 percent as its value fell from $31 on Saturday to $20 on Monday.
Is it a Recurring Trend?
Other than this, the market crash can also be explained using past trends seen whenever the value of Bitcoin has risen — it is followed by a short period of decline.
Over the past five years, Bitcoin first touched the $1000 mark in December 2013 and that was followed by a steep decline which saw the value drop by 50 percent within two weeks.
The value again rose in January 2014 but didn’t touch the $1000 mark until January 2017. Needless to say, the value declined in the following weeks, but this time only to rise — starting in February — in an unprecedented fashion.
Bitcoin is still four times larger than it was at the beginning of 2017.
On July 10, 2017, Bitcoin was valued at close to $2500 but it saw a sudden dip in value over the next week, reaching its lowest in the last few months at $1900 on July 16, only to rise to $2749 a week later on July 23.
Since then, barring a few minor hiccups in the rise in its value, Bitcoin has largely grown to four times of its value at the beginning of this year. Even now, after the crash, on Monday Bitcoin (at $4040) was still four times of its value at the beginning of the year.
At the time of writing this report, an upward trend can be seen in Bitcoin’s value which is currently $4233.
Why is Bitcoin Being Used as the Primary Example?
For those of you wondering why Bitcoin is being used as a primary example to point out this trend, the following should put things into perspective.
The total market value of cryptocurrency right now is $147 billion. The total market value of cryptocurrency without Bitcoin is $74 billion.
So, the main reason is that Bitcoin is the most powerful cryptocurrency with a 48 percent market-share and a huge impact on the overall market.