Digital Currencies on the Recovery Path after Sudden Drop in Value. Just like it is the case with the global financial market, one action in the digital currency market has a huge effect on the entire market. Because of that, many have given up on the financial markets because it has become too stressful for them to participate. One similar thing happened yesterday in China when the government made Initial Coin Offerings illegal in the country. Besides that, Chinese authorities will be inspecting more than 60 companies that have already used ICOs to raise funds for their businesses.
As a consequence of those legal actions, the prices of digital currencies have dropped the most in the last couple of months. Even though it was one of the biggest drops this year, the value of Bitcoin, for example, has remained higher than the one this digital currency had not even a year ago. On Monday, the market capitalization of the digital currency recorded a drop of about 20 percent.
Just days before this drop, the market capitalization of digital currencies reached $179.8 billion which is the biggest amount ever for digital currencies. However, things changed on Monday and the total market capitalization of digital currencies dropped to $139.7 billion. This number has not been this low for a long time and even though it might seem like a huge drop in value, the individual digital currencies did not record that big drop, except for Bitcoin the value of which went down for more than 200 dollars.
Digital Currency Market Stabilizing
Before the sudden drop, Bitcoin has hit the $5,000 market value, but on Monday, the value of Bitcoin dropped to a bit more than $4,800 which is still a record breaking price. However, it did not take a long time for digital currency market to recover from this drop. On Tuesday, experts have already been recording the rise in the value of each digital currency as well as the market capitalization of the digital currencies.
On Tuesday, the market capitalization of the digital currencies was $148 billion which is an improvement when compared to the one from Monday. The drop in values and the market capitalization of digital currencies was the response from the market on the news about China’s new ICOs regulations. Investors were not sure whether or not this issue will be transferred to the digital currencies and because of that, they have decided to slow down with the trade of digital currencies. In essence, that was the reason why the value dropped.
Exciting Times Ahead?
Once it became clear that ICOs ban in China does not have anything to do with the Bitcoin and other digital currencies, investors gained confidence once again and started to invest in digital currencies once again which propelled the value of cryptocurrencies to go up once again. At this moment, digital currency market looks stable and with the latest news from Russia about digital currencies being included in the Moscow stock exchange, the value of these digital currencies will go up significantly.
Because of that, the upcoming period could be very exciting for all investors but then again considering that market is mostly speculative in nature, nothing can be said permanently and that is the reason why investors need to be very careful when investing in digital currencies.
Written by Ivan Potocki
Great article