Cryptocurrency Market Takes a Minor Fall as Bitcoin and Ethereum Retreat 4%
After recording a $20 billion increase in valuation, the cryptocurrency market has dropped in value, as major cryptocurrencies including bitcoin and Ethereum fell by more than 4 percent.
Two days ago, many analysts within the cryptocurrency sector stated that a $20 billion overnight drop in the valuation of the cryptocurrency market was caused by FUD (fear, uncertainty, doubt) around Binance, the world’s largest cryptocurrency exchange. However, it was evident that the market did not fall due to Binance, and it was overreaching to conclude that major cryptocurrencies fell in value by more than 5 percent because Binance received a simple letter from the Japanese financial services agency (FSA), as noted by Binance CEO Changpeng Zhao.
“We received a simple letter from JFSA about an hour ago. Our lawyers called JFSA immediately, and will find a solution. Protecting user interests is our top priority. No need to worry. Some negative news often turn out to be positive in the long term. Chinese have a proverb for this. New (often better) opportunities always emerge during times of change,” said CZ.
It was quite apparent that the market drop was caused by the Binance situation with the Japanese government because even after the FUD was clarified by the Binance team, the market continued to slump. If a single factor in Binance caused the market to fall, that factor also should have been capable of leading the market to recovery.
The majority of analysts in the space attempt to justify every single movement in the market with news or some announcements, which is often extremely inaccurate and impractical. The cryptocurrency market moves up and down based on the supply and demand from the market. The market is still at its early phase, and it is comparable to the market valuation of major banks and thus, it is possible that whales or large-scale investors are initiating correlating movements in an attempt to influence the market.
Over the past few weeks, all major cryptocurrencies including bitcoin and Ethereum were continuously volatile in the $8,000 and $9,000 region. Bitcoin fell from $9,000 to $8,300, recovered to $9,100, and fell to $8,500 today. These movements or daily volatility cannot be justified by one factor. It is a culmination of many factors that influence the market.
In late 2017, the cryptocurrency market was extremely optimistic towards the entrance of institutional investors and retail traders through strictly regulated markets like the bitcoin futures market in the US. But, the demand from investors in the traditional finance sector did not match the expectations of cryptocurrency investors.
The next big movement will likely be triggered by a wave of big investors coming into the cryptocurrency market, and until then, the market will continue to remain volatile. Yesterday, Binance CEO CZ emphasized that volumes are coming back across all major exchanges. First, the volumes have to rebound, and the price of cryptocurrencies can recover, before users and retail investors join the market once again.