What Happened to the Crypto Market?

cryptocurrency

Currently, the cryptocurrency market has been trading with a quick range. The market has experienced small volatility because various regulations from different countries have affected the trading activity. For the last few months, the market movement of cryptocurrency has revealed uncertainty. This unexpected shift started last year when there was irregular spike in cryptocurrency value, resulting in a net market capitalization of more than $830 Billion. The investors who ventured in the market enjoyed massive profits, but this excitement did not last for long. To elaborate the volatility of cryptocurrency, consider when bitcoin leaped up to almost $20,000 in three days having started the week with at about $11,000. Since that period, Cryptocurrency has lost billions of dollars in value hence achieving a low market capitalization of approximately $260 billion.

 

The values of cryptocurrency are very low following the heavy losses achieved in first quarter of 2018. Based on coinmarketcap data, cryptocurrency has dropped by approximately 59% beginning from January 2018. The first quarter of 2018 has marked the bloodiest period in the cryptocurrency market following the value attained. The diminishing value of cryptocurrency has reduced market capitalization from $110 billion to $70 billion. For instance, the prices of both Ethereum and Bitcoin have decreased with a large margin. The following are the top reason why the value of Bitcoin has decreased;

 

Demand

 

The number of transactions has been moving upwards from 2010 following recognition of most cryptocurrencies. This trend has implication that people are no longer interested in making investments related to Bitcoin. Low interest from people has stabilized the demand for cryptocurrency hence lowering market capitalization. Low market cap implies the diminishing value of cryptocurrency.

 

Supply

 

There are approximately 25 Bitcoins mined after every 10 minutes issued at $230 each. This means that the value of new Bitcoins issued in block reward on daily basis is $830,000 based on calculation (25×60/10x24x230). This is because the majority of miners market their bock rewards to recover the cost of mining. To ensure that the price of cryptocurrency remains unchanged, these new cryptocurrencies have to be supplied to market participants from different global areas.

 

Risk

 

Cryptocurrency is exposed to the normal market risk of uncertainty and price volatility. As a result of this, there have been discussions on how to scale Bitcoin transactions using Bitcoin software in order to regulate multiple transactions. The high risk involved in cryptocurrency investment has discouraged people from placing their investment on these coins.

 

The values of cryptocurrency are currently low based on the market report released. Even the top currencies dominating cryptocurrency, Ethereum and Bitcoin have occasionally decreased in value. To ensure that the these values remain high, the following measures should be taken;

 

Cryptocurrency Governance

 

Even though the operations of cryptocurrency are decentralized, the developers operating cryptocurrency software can agree to change this software to facilitate regulation. This will mean that cryptocurrency will be governed in a more effective way to improve its value. When developers agree, they can establish a fork that will replace the software used to mine cryptocurrency. The governance of cryptocurrency will establish principles aimed at increasing the value of these digital currencies.

 

Regulatory Moves

 

The regulatory systems from all parts of the world must institute control measures that will determine treatment of cryptocurrency for tax purposes and among other exchange activities. When regulations are unfavorable, the price of cryptocurrency will be negatively affected. For instance, when the Chinese government shut down various Bitcoin exchanges within the country, the price of Bitcoin decreased significantly within 24 hours. Also, when Japan considered cryptocurrency as a legal tender, the price of Bitcoin increased 2% in 24 hours. To increase the value of cryptocurrency, effective and favorable regulatory steps should be initiated in all countries.

 

Rest Assured…

 

Based on information released by experts in the financial market, the value of bitcoin is expected to rise to approximately $15,492 by the end of next year (2019). This will be a great change compared to the current price of bitcoin below $8000. Other experts are predicting that the value of bitcoin will hit $60,000 by the end of 2019. All of these values are based on predictions considering the market value of bitcoin. But in reality, cryptocurrency will continue to increase in value with Bitcoin remaining the big guy, followed by others such as Ripple and Ethereum.

 

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