Cryptocurrency Market Takes a $200 billion Hit

[engine]

The cryptocurrency market has taken a bit of a hit with, at the time of writing, over $200billion market value lost.

At around 10 a.m. London time, bitcoin was down over 8% in the last 24 hours at $48,687, according to Coin Metrics data. It’s the first time bitcoin has traded below $50,000 since early March. Ether fell to $2,211, down more than 12%. XRP, the fifth-biggest cryptocurrency, plunged nearly 19%.

This wiped out more than $200 billion of value from the entire cryptocurrency market, according to data from CoinMarketCap.

[cnbc.com...]

[lammert]

Some people may get nervous. This is the second plunge after the flash crash last Sunday. From a technical standpoint I am very interested to see what will happen if many people start to sell their coins to cash their profit or prevent more personal losses. Bitcoin has a minimum transaction time of 10 minutes which can grow beyond one day. And the distributed confirmation process can only handle 5 transactions per second.

This can both have a dampening effect on the price fluctuations or amplify it.

[JorgeV]

Hello,

This was highly predictable.

First of all, there are those, who are cashing their profits, when you record, 3 digits growth, at some point, you need to cash your profits.

Also, Turkey banned Bitcoins, if I don't make mistake, it's now illegal to trade, or even own bitcoins there. And this is only a beginning. From what I understood, India is also considering banning cryptocurrencies. And don't forget about taxes, lot of people do not realize they have to declare their assets , and pay taxes on their profits.

I only believe in real money, earned from your work.

[NickMNS]

This was highly predictable.

Not really, market prediction requires two things a predicted price and predicted time. Sure one could expect that Bitcoin was going to fall, exactly by how much and when was not knowable. Is it done falling?

Turkey banned Bitcoins

What does that mean? It's not like a government can block access to a website and be done. Bitcoin is on decentralized network, it is nearly impossible to ban. The same holds for India, not to mention the fact that India has enough trouble controlling its own fiat currency for which it holds complete control.

And don't forget about taxes

Yes you have to pay taxes, just like you do if you invest in Game Stop, trade fiat currencies or mortgage assets. If you live in Miami you may soon be able to pay your taxes in Bitcoin.
[nasdaq.com...]

It was also possible in pay taxes in Ohio for a short time between 2018 and 2019, but was stopped.

There are many problems with Bitcoin, some of which have been pointed out by Lammert. But blockchain technology is here to stay and announcements such as this one are proof of that:
[techcrunch.com...]

The sudden drop in the value of Bitcoin is not reflected in Ethereum it has only dropped by about 10%.

Now this recent run up in prices and mass media attention is very much linked to the Coinbase ipo:
[nasdaq.com...]

Now that the ipo has passed, we move from the pump phase to the dump phase and the asset being dumped is crypto. I wonder what Elon Musk's stake in Coinbase was?

[JorgeV]

Hello,

Bitcoin is on decentralized network, it is nearly impossible to ban.

But if it's made illegal in a country to own, trade, pay or accept bit coins , it ends to be banning anyhow. Turkey is doing it, and India is considering.

[NickMNS]

But if it's made illegal in a country to own, trade, pay or accept bit coins , it ends to be banning anyhow.

No its is not the same as banning it. Despite that it may be declared illegal, you continue to have access to your wallet and you can continue to use the currency.

India is a good example, in 2016 they declared that the 1000 and 500 rupee notes would no longer be recognized. They provided 4 hours notice before banning the notes. Any notes that you had in your possession after that point was instantly rendered worthless. It is not possible for a government to do this with Bitcoin or Ethereum or any sufficiently decentralized crypto currency.

A Turkish citizen could still exchange his Bitcoin for another currency or good. Sure this would be an illegal act, but that would only be a concern if caught.

Edit: Here is more about India and the rupee notes
[bbc.com...]

[lammert]

I see two major routes to ban bitcoin. One is when a majority of the servers which do the transaction validation are shutdown. With two-third of the servers located in China, there is currently only one country capable of doing that.

The other route is by banning cryptocurrency conversions to hard currencies through banks and regulated payment providers. You will still be able to do transactions in bitcoins, but in the real-world they will become useless if you can't convert them to USD, EUR or some other currency.

[NickMNS]

One is when a majority of the servers which do the transaction validation are shutdown. With two-third of the servers located in China, there is currently only one country capable of doing that.

Yes China could shut-down the majority of the nodes, and this would certainly disrupt the system, but in theory the blockchain could be forked and continue to operate with the remaining nodes. But the real risk in this situation is not "banning", it is that China could launch a 51% attack and thus gain control of the blockchain. Taking control in a very public way would likley cause the the crypto-currency's value to drop to zero, so it would again be unlikely as China would have the most to loose in that scenario. However, secretly and and strategically using the control could potential persist for some time. But even with the 51% attack, the chain could be forked an continue to operate, albeit with limited confidence.

Note that forks of blockchains have occurred in the past and have resulted in the creation of Bitcoin Cash, and Ethereum Classic.

banning cryptocurrency conversions to hard currencies through banks and regulated payment providers.

This is really the only way, but I doubt that it would be fully achievable as there would always be some off-shore location where it will remain possible to transact between fiat and crypto. And there are also many cunning individuals that will create other markets where assets other than fiat currency could be traded for crypto currency, most obvious is art. NFT's?

The bottom line is that crypto-currencies and more generally blockchain technologies are not going anywhere. We are in the infancy of the "technology" where it will go how it will mature is a much bigger question to ponder.

[lammert]

Can anyone give me some popcorn? Sitting on the couch watching bitcoin is more exciting than many sport events currently. It just took a hit of 25% in the last 15 minutes.

[NickMNS]

It just took a hit of 25% in the last 15 minutes.

And that sums up the single biggest problems with crypto currency. As long as wide swings in value are a regular occurrence it becomes impossible to use it as a medium of exchange.

[JorgeV]

Hello,

Bitcoin lost 30% of its value in one day! Plummeted to less than $ 32,000 after ban announcement in China
[entrepreneur.com...]

the single biggest problems with crypto currency

As well as losing private keys

Lost Bitcoin: 3.7 million Bitcoin are probably gone forever
Around 20% of currently minted Bitcoin—worth a small fortune—are gone forever, and can never be retrieved. Here's where they went.
[decrypt.co...]

[RhinoFish]

Swings are a huge problem for any currency, but swings are a very distant 2nd place on the list of crypto's biggest problems.

What's #1 you ask... govts could not pay their bills if non-fiat crypto becomes our de facto currency.
Deep deficit govt spending and non-fiat crypto goes together like nitro and glycerin.
Govts are NOT going to give up their (nearly) exclusive power to print money.
They will soon declare that anyone (other than them) controlling the supply of digital money is dangerous for various reasons, and they will then tie crypto to fiat.
Watch for Bitcoin's mining to be labelled as bad for the environment, and the experts will begin telling us why it needs to be tied to the fiat USD or a basket of fiat monies.

Look at what's actually coming, fiat digital... it's called Central Bank Digital Currency (CBDC)...
[atlanticcouncil.org...]

[NickMNS]

@RhinoFish
First off, I don't think that anybody (any serious person) is suggesting that Bitcoin or any other crypto currency will replace USD or EUR or any other major fiat currency. Now governments of countries with failing economies and currency (eg: Venezuela, Lebanon) they may have a reason to be concerned. But given their economic/political situation they will be powerless to stop cryptos (see posts above for why).

Mining or more accurately "Proof of Work" is bad for the environment, it wastes an enormous amount of energy for no tangible benefit. But others methods of consensus exist, mainly "Proof of Stake", several new "next gen" crypto currencies already work on this basis. And Ethereum is expected to make the move to POS toward the end of this year (ETH2.0 see: [ethereum.org...] ) .

Look at what's actually coming, fiat digital... it's called Central Bank Digital Currency (CBDC)...

Yes this is a sign of further evidence of the adoption and acceptance of this technology. Bitcoin and Ethereum are early iterations not the final solution, think Netscape vs Chrome. How this will evolve and what will become of it remains to be seen.

[RhinoFish]

First off, I don't think that anybody (any serious person) is suggesting that Bitcoin or any other crypto currency will replace USD or EUR or any other major fiat currency.

You're joking, right?

It is either a digital form of the USD (or EUR), OR, it has it's own intrinsic value.
As we watch the price for a Bitcoin change wildly against the USD (or EUR), we know it is the latter.
If everyone starts using Bitcoin (or Ethereum), it is indeed replacing the USD (and EUR).
Govts won't be able to print non-fiat digital monies, therefore they cannot use deep deficit spending (unless someone is willing to lend them trillions per year, every year).
Non-fiat crypto-currencies, as attractive as they sound, will cause pain and death on the scale of a world war.
Govts are not going to give up their (nearly) exclusive right to print money, they would implode.

[mack]

I think investing in crypto is always like walking on ice. I do it, but I never use large amounts and I generally buy on dips over a period of hours and just make a small profit. I know people who have invested sizable amounts of money and they wait it out.

The problem I see with this kind of investment is people are reluctant to sell. There is always the thought that it "could" go higher. It's almost like a person putting more money in a slot machine hoping to win back what they have already lost, or in this case gambling more, hoping their luck holds.

I really don't see how any of the current cryptocurrencies can ever be a true currency. If I buy something for $x today I expect it to be $x tomorrow, not double or half. Lack of stability is a massive issue. Most cryptocurrencies are so much in flux it's almost impossible to see their real value.

Another issue is spending them. Transaction fees anyone? Spending BTC on anything small is just a plain waste. There are alternatives obviously, but that's just another step added to the sales process.

Cashing out: For something that is supposed to be private and decentralised I have never known anything to require such a level of verification just to be able to exchange crypto to "real" money. Whenever I cash out I tend to just buy Amazon vouchers or something to allow me to spend it that way.

I think the recent drop has a lot to do with Elon Musk. It's incredible just how much ability he has to cause chaos on the market when he talks about it. First, he accepts BTC to buy a Tesla, price rockets. Then he announced they won't and price drops (and takes most of the market with it) then he calls DOGE a "hustle" and it's price crashes.

He sends out a mixed bag of messages as if he is trolling the industry.

Mack.

[NickMNS]

Another issue is spending them. Transaction fees anyone?

Transaction fees are a definite problem. I'm looking at putting together a blockchain app, but when transaction fees can increase by 10x in the span of a few hours, it is very difficult to create business case with an average Joe/Jane as the target client. Add to that price volatility and your done. How do you sell a product that costs 10$ in the morning and 100$ at night?

I think the recent drop has a lot to do with Elon Musk.

It makes a great story but I have my doubts. We are seeing the aftermath of the CoinBase IPO. First came the pump, to get everyone hyped on crypto ahead of the IPO. BTC hit it's high two days before. From that point forward we reached the dump phase. The smart money takes a short position, and sits back as the value drops, not too far though. You don't want to cause outright panic. Then the smart money starts buying again, to get the dumb money to jump back in, then they short again. Rinse and repeat. and you get a nice stepped pattern down. GameStomp anyone!

The Elon Musk "story" is the stand in for the "We are bankrupting hedge funds" narrative.

[NickMNS]

To further add to my point above, there is a lot of dumb money chasing the crypto bandwagon
[markets.businessinsider.com...]

[lammert]

Exactly NickNMS. I am following cryptos out of curiosity for a long time and there are obvious pump and dump patterns. So many "investors" are holding to their cryptos at all costs (literally) that with an average of 1000 bitcoins (0.005% of the total) manipulators are able to swing the price several percent, both up and down. Every whale in the market with a few thousand bitcoins can willingly or unwillingly (Elon Musk) move the market in any direction they want.

[mack]

Whenever we hear/read about market losses I often wonder what percentage of the currency was already lost. By lost I mean loss of access to wallets, HDDs being destroyed or cryptocurrency turning to "dust" in someones account because transaction fees would be more than the currency value. Over the years this has certainly mounted up.

When we talk about market caps etc... It would be interesting to know what percentage of the crypto out there, is really available to be used.

Mack.