By Jeffrey Gogo
There is a bloodbath on the cryptocurrency markets. From Ripple to the mother of all digital currencies Bitcoin, the floor is red amid panic selling and rumours of price manipulation.
This week Bitcoin fell below $6 000 on global markets for the first time in three months, according to data from coinmarketcap.com, a website that tracks digital currencies.
The coin reached a high of $20 000 around Christmas in a cryptocurrency hype that drew comparison with the Internet mania of the 1990s.
From that peak, Bitcoin has crashed more than 70 percent, and is down 54 percent year-to-date.
Its total market value has more than halved to $139,6 billion.
Those investors that bought Bitcoin on the Harare exchange Golix.com at $30 000 at the height of its rally in December have booked over 60 percent in losses.
Early morning yesterday, Bitcoin traded at $12 000 on Golix.com
The price on the local exchange trades at a premium of 90 percent due to a lack of liquidity and high demand.
Bitcoin’s decline worldwide precipitated a fall in most digital currencies.
The coin remains the benchmark, when it catches a cold, the rest sneeze, even when some have tried to break free from Bitcoin’s shadows.
Ethereum, Ripple, Litecoin, Bitcoin Cash, Cardano and Monero, some of the top valued currencies, have all crashed by between 50 and 80 percent since the beginning of January.
The plunge has taken the total global market capitalisation of the more than 1,300 digital currencies in existence down to $391 billion from twice that much six weeks ago, data from coinmarketcap.com shows.
Why the fall?
There are several conspiracy theories flying about, from price manipulation to Bitcoin being a scam, correction to market dynamics, thought to have driven the cryptocurrency tailspin.
Once the “whales” of Wall Street moved into Bitcoin with the listing of Bitcoin futures on two American exchanges in December, concern began to swirl the moguls would bring with them the oft alleged price manipulation games synonymous with Wall Street.
But isn’t that what Bitcoin had all this time been aiming at, a kind of mainstream acceptance?
Indeed, the trading of Bitcoin futures contracts — basically a bet on the future price of the virtual currency — on the Chicago Board Options Exchange and Chicago Mercantile helped boost the Bitcoin rally in 2017.
That’s now all been undone in a few days of skeptical dooms-day panic selling.
Others have blamed Tether, a coin theoretically equal in value to the US dollar, one built to ease the problem of converting crypto to notes and coins, and to buy and move crypto quicker, for being used by owners of Bitfinex exchange to manipulate the price of Bitcoin, according to a report by CNBC.com
The report claims that each time Bitcoin is falling more Tether is issued, presumably to push the price of Bitcoin up. About 850 million Tether entered into circulation for this purpose in January, it says.
Also, eminent figures in politics and economics have started to make negative public comments concerning Bitcoin and the rest of its smaller cousins.
From British Prime Theresa May to the outgoing US Federal Reserve chair Janet Yellen have voiced concern over Bitcoin.
Here Finance Minister Patrick Chinamasa dismissed Bitcoin as “Utopian”.
Financial regulators and governments are also coming down hard on cryptocurrencies, blaming them for opting to self-regulate and for allegedly fanning money-laundering.
In South Korea and China, which control roughly a quarter of the global cryptocurrency trade combined, several digital currency exchanges have been shut down.
Banks there have been asked to cut ties with Bitcoin exchanges or to do away with the anonymity preference altogether, a feature that cryptos thrive on.
In the West, some banks stopped their clients from using credit cards to buy cryptocurrencies, with global firms Visa and Mastercard reportedly placing similar restrictions.
The picture they are painting is one of a currency that is the “bad boy” of the financial world: unstable, speculative, volatile and not to be trusted.
Should Bitcoin be allowed to circulate, the multiple spins seem to suggest, it must face similar, if not greater, control and regulation as with fiat money.
The freakish responses by the world governments and financial regulators are understandable, but not inexcusable.
Bitcoin is a new technology that is both disruptive and misunderstood.
The risks and opportunities, thereof, will need time and experience to sink in.
But all this has the effect of creating feelings of dislike, skepticism and panic among investors.
After that, the dumping starts as everyone tries to offload their crypto holdings all at the same time, causing prices to crash.
It could be the equivalent of a bank run, only this time hasn’t led to a total collapse. Most Zimbabweans would be familiar with one such script.
Where to from here?
Since the formation of Bitcoin in 2009, the digital currency has tended to follow a particular trendline: wobbly at the start of each year — or at any other time — before rocketing as the year progresses.
For example, the price of Bitcoin peaked at over $1 000 in November
2013 before dropping to around $660 February of the following year. It stabilised at $750 for a time that year before falling again.
These periods of sustained crashes to a certain level of support have over the years often been followed by periods of wild swings, and then stability.
This was the same expectation when the price of Bitcoin started to fall late December 2017 and into January.
When the price got to $15 000 early January pundits pointed to a correction that was long overdue following the 1 400 percent surge of 2017.
Then it dropped to $12 000. And then $10 000. Still, pundits pointed to the graphs.
But when Bitcoin this week fell below support at $8 000 even the often optimistic cryptocurrency gurus began to fret.
Many had expected the virtual currency to fall, but not as deeply as it did.
That’s when talk of price manipulation started flarring up. The greatest ponzi scheme the world has ever seen collapsing, the bubble is bursting, many feared.
Ever the master of volatility and unpredictability (a characterstic not to be envied), Bitcoin pulled back more than 36 percent to $8 200 on Coinbase yesterday morning, from a multiple-months low of just under $6 000.
It is hard to say whether the virtual currency will recover most of the losses suffered in recent weeks soon.
And after the bullish predictions by many a pundit and investor for
2018 earlier on in the year, many will be left asking questions, especially the trader.
For the long-term investor, its HODL — a corruption of the term “hold” that in the cryptocurrency space is used to describe investors hanging on to their portfolios in the face of a price decline, often a quick fall that in a different world would be unsettling.
This is not a cryptocurrency amargeddon.
We watch and learn!