Bitcoin, which has been remarkably stable for a number of months, has suddenly lost more than 5% of its value, causing other major cryptocurrencies, including ripple (XRP), ethereum, stellar, litecoin, EOS, and bitcoin cash to plummet along with it.
Earlier this month the bitcoin price hit a 17-month volatility low but that period of calm now appears to be over, with the bitcoin price taking a hit that wiped billions of dollars from its market capitalization within minutes, according to CoinDesk data.
Shortly after the initial bitcoin price nose-dive, it did somewhat recover — clawing back some of its lost ground. Bitcoin was earlier today trading at around $6,500 — where it has been for the past couple of months. It briefly fell to $6,125, but then recovered to around $6,200.
Bitcoin’s recent ebbing price (down from highs of almost 20,000 at the end of last year) has been put down to a fall in trading volume since its peak at the end of 2017 — something that has hit cryptocurrency exchanges around the world, prompting some businesses to cut costs and lay off staff.
Short, sharp changes in the bitcoin price are often attributed to either trading bots initiating a buy or sell order that then gets picked up by others, causing a domino effect on the price, or by so-called whales (large holders of a cryptocurrency or another asset) buying or selling a big enough chunk at under or above the current market rate.
This causes the market rate of the asset to suddenly move in the direction of the sale, often causing havoc for exchange operators.
However, a study out earlier today found bitcoin whales are often not responsible for bitcoin price volatility. Blockchain research firm Chainalysis found that bitcoin whales are “a diverse group, and only about a third of them are active traders. And while these trading whales certainly have the capability of executing transactions large enough to move the market, they have, on net, traded against the herd, buying on price declines.”
Chainalysis’ looked at the 32 largest bitcoin wallets, representing around 1 million bitcoin, or around $6.3 billion, for the study.
Meanwhile, many investors are waiting on both regulators and the established financial services industry to show their cryptocurrency hands before deciding whether to cash out or double down on their investments.
The U.S. Securities and Exchange Commission (SEC) is still weighing whether to grant approval to a closely-watched bitcoin exchange-traded fund proposal, which could open up the bitcoin investment market to a raft of fresh capital.
Many are still hopeful the SEC will eventually approve a bitcoin ETF and are also looking forward to the launch of a bitcoin and cryptocurrency platform called Bakkt, in November — created by New York Stock Exchange (NYSE) owner ICE in partnership with coffee chain Starbucks, software giant Microsoft, and Boston Consulting Group.
Global regulators are meanwhile grappling with how to best limit bitcoin and cryptocurrencies use for illicit activities and protect retail investors from potentially high loses, while at the same time nurture the emerging bitcoin, blockchain, and cryptocurrency industries.
Earlier today the global Financial Stability Board (FSB) said that cryptocurrencies such as bitcoin do not pose a threat to financial stability but recommended further monitoring and consumer protection.
“Based on the available information, crypto-assets do not pose a material risk to global financial stability at this time. However, vigilant monitoring is needed in light of the speed of market developments,” the FSB said in a statement.
The FSB’s advice comes after the International Monetary Fund (IMF) yesterday warned the “rapid growth” of bitcoin and cryptocurrency assets could create “new vulnerabilities in the international financial system,” as the world’s banks adjust to the recent bitcoin and blockchain boom.
Earlier this week, European Union regulators said customised rules may be needed for bitcoin and cryptocurrencies as warnings to investors over the high risks associated with crypto assets have failed to have a meaningful effect.
Of the top ten biggest cryptocurrencies, bitcoin cash, ripple (XRP), and stellar were the most heavily sold off during the recent rout, at the time of publication.