Summary:
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More and more miners cease operations due to low prices
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Bitcoin (BITCOIN) hovers around $4000 handle
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Ripple overtook Ethereum as the second largest cryptocurrency following latest sell-off
An uncontrollable sell-off on the cryptocurrency market continued this week with numerous major coins slumping to their lowest levels in a year. Bitcoin moved below the $4000 threshold for the first time since late September 2017 and Ethereum is trading over 90% below its record high. The continuous decline in valuations causes more and more cryptocurrency mining farms to shut down and we will begin with this story.
BITCOIN took another serious dive over the weekend and saw its price slumping to $3655, the lowest level since late-September 2017. With no relevant support level earlier the coin could extend declines as low as to psychological $3000 handle. Source: xStation5
According to Mao Shixing, founder of F2pool, as much as 800k Bitcoin miners could have shut down during the past two weeks. Founder of the World’s third largest bitcoin mining pool said that hash rates of seasoned mining machines make it hard for companies to stay profitable at current price levels. In turn the hash rate of the whole Bitcoin network, the aggregated computing power of Bitcoin’s blockchain, dropped to 42 million TH/s (tera hashes per second) from peak of 60 million TH/s seen in late September and early October 2018. Shutdowns of some Chinese mining farms are said to account for a large portion of the decline. In theory, such a development could have positive impact on prices as it indicates drop in supply. However, one should be wary that the cryptocurrency market failed to properly adhere to underlying economic conditions several times in the past.
The relatively stable share of Bitcoin in the market highlights the fact that the major cryptocurrency is pacing movements of the whole virtual currency sphere. Source: Macrobond, XTB Research
The ongoing crash on the cryptocurrency market saw some changes in the ranking of top cryptocurrencies. Ripple overtook Ethereum as the second largest cryptocurrency with the market cap of the former hovering around $15 billion and the latter around $11.8 billion. Moreover, EOS briefly surpassed BitcoinCash in terms of market capitalization and became the fourth largest coin. Capitalizations of both cryptocurrencies stand somewhat above the $3 billion mark. A steep rise on the cryptocurrency market saw numerous people calling for tougher regulations on the back of the amount of money invested in virtual currencies. However, much has changed since then. At the beginning of the year when the capitalization of the whole cryptocurrency market peaked close to $829 billion there was just one company quoted on the US stock market being valued higher - Apple. The capitalization of the cryptocurrency market dropped below $128 billion recently. It means that now there are over 35 US public companies that are valued more than all of the cryptocurrencies together!
Ripple once again coped better during the cryptocurrency market turmoil than most of its major peers. Moreover, the coin was also quick to recover to pre-weekend levels. Nevertheless, Ripple trades around 88% below its record high. Source: xStation5
Figures mentioned above lead us to another conclusion that can be seen as unfavourable for the cryptocurrency market. Many people think that once widespread regulation for the cryptocurrency market are in place the large financial institutions will rush to pump billions of dollars into this market. However, given the capitalization of less than $127 billion and daily trading volumes dropping below $20 billion (according to CoinMarketCap) the reality may be much different. Major investment banks may stay reluctant to invest in cryptocurrencies, even once they are regulated, because this market is just too thin. Pumping significant amounts of money poses a chance of distorting prices severely therefore scale of any investments of large institutions is likely to be minor.
