It seems like everywhere you look there’s panic at the moment. Equities, futures, oil and, yes, even crypto, have suffered to varying degrees over recent days. The causes of the current carnage are many: the worsening coronavirus epidemic, Russo-Saudi standoff and general global economic woes have all come to a head in a perfect storm that is laying waste to markets worldwide. Perhaps the most worrying revelation has been that digital currencies haven’t remained immune from the crisis. Indeed, cryptocurrencies have often been touted as a solid hedge in times of volatility, with many proponents claiming that they move independently from conventional financial assets. But crypto’s recently-acquired safe harbour status was unceremoniously stripped this week as more than $25 billion was wiped from the market's total capitalisation — a 9% decline — in less than 24 hours. And if anyone needed any more convincing as to just how bad things are for digital assets, today ought to have finally laid the case to rest once and for all as another $25 billion in market cap evaporated for a total loss of $50 billion in less than a week.
The flagship digital currency Bitcoin was hit pretty hard, losing 10% in just 24 hours. Although it did show some short-lived signs of recovery in the days that followed, today (12/03/2020) saw it plunge another 15%. Ashish Singhal, CEO of the cryptocurrency exchange CoinSwitch.co has gone on record as stating that: “the sudden drop in prices seems to have arisen out of the selling of BTC by PlusToken”. While it’s true that the well-known Ponzi scheme’s large-scale sell-off will have had some effect on the coin’s decline, this trend is symptomatic of a much wider selling frenzy. The world markets have been in virtual freefall since oil futures tanked more than 30% on news that OPEC had failed to agree on new production cuts. BP was down 23%, Royal Dutch Shell fell 15%, and Premier Oil plummeted 55%. And the situation doesn’t look like it will be resolved any time soon with belligerents Russia and Saudi Arabia both apparently up for a price war.
As you might expect, the damage wasn’t limited to BTC and many other coins suffered similar or even worse fates. Ripple’s XRP, for example, dipped close to 10% over the weekend and has since fallen a further 20%. Now the third-ranked cryptocurrency by market capitalisation is trading at around $0.15 a coin, down from $0.24 a week ago. And with few signals to suggest a rally might be on the cards, it could be some time before we see it regain this lost ground. In what came as a surprise to many, Ethereum felt the impact even more acutely. The smart contract-focused asset recorded losses of over 20%, bombing from $253.00 to a low of $189.00 on Monday. Since then, it’s gone from bad to worse for ETH, with the coin recording further losses of nearly 30% in the last 24 hours. Meanwhile, things were even worse for Bitcoin’s little brother Bitcoin Cash. The number four cryptocurrency by market cap initially lost 25% as at the end of last week and has since declined another 35% today. The other big loser this week was another Bitcoin hard fork, Bitcoin SV. Much like its older sibling, BCH, it has had a pretty torrid time this week and is now trading at close to 50% of its value as on 6 March.
If this week has proven anything, it’s that everything really can come crashing down in the blink of an eye. Despite stocks seemingly unstoppable run that had lasted over a decade, many saw this rout coming a mile off. The equity markets may have been recording new high after new high for months on end, but there was little to justify this constant growth. Everything was hugely overpriced and, with the global economy already slowing down, it was never likely to take much to send it all tumbling down. In the end, the straws that broke the proverbial camel’s back were the coronavirus outbreak and threat of oil price war. Had they come in the middle of a healthy growth cycle, they wouldn’t have had anywhere near as pronounced an impact – but after 11 years of a largely uninterrupted bull market with precious little to back it up of late – these twin crises were enough to wipe close to two years’ worth of gains from the S&P 500.
What was largely unanticipated, though, was that this crash would also contaminate the crypto market. Recent history seemed to suggest that digital currencies were on their way to becoming a haven asset in their own right and doubtless many had expected them to rise while everything else plummeted. But to the dismay of those who chose crypto as their hedge, this market once again demonstrated its trademark unpredictability as it bombed even harder than equities and oil combined. The silver lining here is that digital assets now represent excellent value for money and there truly has never been a better time to buy than today. If you are to take advantage of the bargain basement prices, though, you’ll first need a trading account with a reliable exchange such as StormGain. Register an account now and get in the market before prices inevitably correct!
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