After a week of trading flat, the cryptocurrency market experienced a sudden flash crash earlier this week, with most currencies losing anywhere between 10 and 20 percent of their total value. While the first significant price drop was witnessed on June 10, the declining trend persisted over the three days that followed as well. While cryptocurrencies have not exactly been skyrocketing as they were throughout 2017, the sudden downward shift came after an extended duration of low trading volume and price movement.
Exchanges Sent Subpoenas
The exact reason for why the market turned red remains unknown. However, the controversy involving the US CFTC investigating Bitcoin Futures for price manipulation may have been responsible for caused a selloff. The commission sent subpoenas to four cryptocurrency exchanges to access trading data on June 9, only a day before the crash. Even prior to the past week though, Bitcoin and the rest of the cryptocurrency market has been experiencing downward volatility for quite some time now.
Bitcoin Bear Market
For reference, the exchange rate of one Bitcoin against the US Dollar briefly touched $20,000 in January of this year, which is a price point three times that of current levels. Since then, almost every single digital currency has been trading downward. The negative trend is perhaps best exemplified by the fact that the combined market capitalization of all cryptocurrencies is also much lower than its record high set a few months ago. According to data available from CoinMarketCap, the cumulative market cap was at its highest on January 7, 2018 at around $830 billion. Six months later, however, that statistic has fallen significantly and is currently hovering at just above $280 billion. This 66 percent decline may indicate that the bulk of the cryptocurrency market tends to follow a general trend and that the current bear market is not restricted to one or two cryptocurrencies alone.
It is important to note that this is not the first time that the price of Bitcoin has seen a drop of over 50 percent. In the near decade since its inception, the cryptocurrency has lost as much as 90 percent of its total value before recovering later on. However, as past results are not necessarily indicative of future gains, it is impossible to say whether or not a similar resurgence will be seen this time around as well. Despite falling to sub-$6,300 levels on Wednesday, Bitcoin managed to make a slight recovery and is currently trading at around $6,600 as of the time of writing this article. The small bump in investor confidence may have been caused by the United States Securities and Exchange Commission releasing a statement clarifying that it does not consider a decentralized cryptocurrency to be a security. With extremely low trading volumes now though, it is possible that Bitcoin will breach the $6,000 price level in the near future.