Should Crypto Investors Fear after Yesterday’s Selloff

If there was one thing common between Crypto markets and stock markets, then that was a sell-off. Crypto investors lost $13 billion in the latest selloff.

The cryptocurrency market has plunged in Asian markets on Thursday led by the most valuable digital coin, bitcoin. Significantly, all the top ten virtual assets are trading in the red with considerable losses. As a result, the overall market has shed a valuation of approximately $13 billion in a span of a few hours. Interestingly, this came on the back of a sharp plunge in stock markets after an overnight drop in stock values in Wall Street.


Negative Factors

The question which is lingering in everyone’s mind is whether there is a correlation between Cryptocurrency markets and stock markets?

Well, the answer to that is a big “No.”


However, the most common problem plaguing both markets is lack of liquidity. The fact that Bitcoin price dropped down below $6,300 level price whereas the second-placed Ethereum witnessed 10.8 percent fall to about $200. As far as the third-placed XRP is concerned, the virtual asset price plunged 24 percent. In the same way, prices of bitcoin cash dropped 14.38 percent whereas EOS fell 6 percent. Following this, the overall cryptocurrency market has seen its value erosion of close to $13 billion.

The key point here is that the drop in digital coins comes at a time when financial authorities have issued a fresh warning. They were more concerned about the increasing growth and the potential threats it could pose to the general economy. Only recently, the International Monetary Fund viewed, “Continued rapid growth of crypto assets could create new vulnerabilities in the international financial system.”


No Positive Catalysts

The cryptocurrency market dropping like this is not new in the current year though it was opposite to the trend seen in the previous years. The year 2017 witnessed a whopping and unimaginable gain from digital currency market and reached the peak towards the Christmas season in December. However, the current year is witnessing more sell-off since regulators have entered the space in full swing to put it straight. Also, there were no positive catalysts to reverse the trend, and there have been only unfavorable factors or events that are only hurting the market. At the same time, the regulators are cautious and do not want to curb innovation.

The entry of regulators has raised the hope that they will come out with measures to professionalize the sector and encourage virtual assets-linked exchange-traded funds (ETFs). However, that did not happen and on the contrary, the United States SEC has rejected ETFs based on cryptocurrencies. They did not spare the popular Winklevoss brothers supported ETFs too. Aside from these, the current year has seen some of the high-profile cyber attacks on cryptocurrency exchanges, and they have to bear the brunt of it. Similarly, fraudsters have tried to take advantage of the emerging asset class and tried to raise money through initial coin offerings (ICOs). These events or factors have continuously posed threats to the stability of digital coin prices.


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