Bitcoin Bloodbath: Price Nosedives as $53 Billion Wiped off Crypto Market Cap

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Bitcoin Bloodbath: Price Nosedives as $53 Billion Wiped off Crypto Market Cap

Bitcoin prices have plummeted. Thursday, after reaching a low of $7,676, before rebounding considerably. The market capitalization of the whole cryptocurrency market lost $53 billion in value in a sell-off that began yesterday.

According to CoinMarketCap.com, the overall market value of the world’s virtual currencies was $319.9 billion as of this writing, down from $372.9 billion the previous day.

Meanwhile, the price of one bitcoin token (BTC) was $8,031 as of this writing, down 2.18% from the previous day. Unsurprisingly, the values of eight of the top ten most valued cryptocurrencies have all plummeted since yesterday.

The only two virtual currency to survive this week’s sell-off were Ethereum Classic and Ontology.

(Source: WorldCoinIndex)

Market experts attribute the current price dip to Google’s decision to prohibit cryptocurrency advertising on its platform. The prohibition goes into force in June. Google’s director of sustainable advertisements, Scott Spencer, said that the prohibition was required to safeguard customers from being duped:

“We don’t have a crystal ball to know where the future is going to go with cryptocurrencies, but we’ve seen enough consumer harm or potential for consumer harm that it’s an area that we want to approach with extreme caution.”

The decision comes after Facebook imposed a similar prohibition on bitcoin marketing in January 2018. (Read more: Facebook Bans Cryptocurrency and ICO Ads.)

Twitter CEO Jack Dorsey has yet to comment on the Google/Facebook crypto brawl, leaving many to speculate on what he will do with his vast social media network. (Read more: Google Bans Crypto Ads, Putting Twitter CEO Jack Dorsey in Danger.)

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Is a Bitcoin Whale to Blame?

There are constantly claims that “bitcoin whales,” or persons who hold big sums of BTC, affect bitcoin pricing. It’s no surprise that over 1,000 individuals/entities own 40% of all bitcoin in the world, hence they have a disproportionate effect on BTC price swings.

One bitcoin whale acknowledged last week that he had sold around $400 million in bitcoin and Bitcoin Cash since September 2017, prompting many to blame his “dumping” for the current price slump. Nobuaki Kobayashi (pictured), a Tokyo-based attorney and bankruptcy trustee for the now-defunct Mt. Gox crypto exchange, is soliciting funds to repay creditors.

Mt. Gox, which operated from 2010 to 2014, was formerly the world’s biggest bitcoin exchange, processing 70% to 80% of all global transactions. The website declared bankruptcy in 2014 after losing 850,000 bitcoins (worth around $500 million) due to a cyberattack.

But this time, it’s likely that more than one bitcoin whale is causing havoc in the unregulated crypto industry. As the market creates incessant headlines and investor interest in the digital asset class grows, it has come under increased regulatory scrutiny in both the United States and Asia.

While cryptos have their advocates and opponents, Allianz Global Investors, which manages $583 billion in assets, has joined the expanding list of naysayers.

‘Bitcoin Bubble Will Pop’

Stefan Hofrichter, Allianz’s director of global economics and strategy, believes the media hoopla around cryptocurrency will continue for some time, but that it will all come tumbling down.

Hofrichters said in a long blog post that bitcoin mania displays all of the typical characteristics of a bubble set to collapse. (Read more: Allianz Global: Bitcoin Bubble ‘Probably Just About to Burst.’)

“It appears to us that bitcoin mania is a textbook-like bubble – and one that is probably just about to burst. As a currency and asset class, bitcoin has potentially fatal flaws – which is why we believe it’s a matter of when, not if, the bitcoin bubble will pop. Its trajectory resembles a textbook case of a financial-market bubble, and it is lacking several key qualities that would qualify it as a currency. “

According to Hofrichter, the positive thing about a bitcoin bubble bursting is that it won’t have much of an impact on the “actual world” since bitcoin is still a very tiny asset class – for now.

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“Because the market for this cryptocurrency is still fairly limited,” Hofrichter reasoned, “Bitcoin’s death would have little spillover consequences on the’real world.'” “As a consequence, we assess that the dangers to financial stability posed by bitcoin are insignificant – at least for the time being.”

Is Hofrichter correct? It’s much too early to tell. (Also see: Bitcoin Price Drops in Mass Selloff as Crypto Owners Attempt to Avoid Taxes.)

Investing in cryptocurrencies and Initial Coin Offerings (“ICOs”) is very dangerous and speculative, and neither Investopedia nor the author suggest that you do so. Because every person’s circumstance is different, a knowledgeable specialist should always be contacted before making any financial choices. Investopedia makes no guarantees or warranties about the accuracy or timeliness of the information provided on this site. The author owns no cryptocurrencies as of the day this post was published.

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