The cryptocurrency bubble has broken out.
In January, the total market capitalization of cryptocurrencies had risen over $ 800 billion, from only $ 18 billion a year earlier, according to the data provider CoinMarketCap. Now the market has lost three quarters of its value to stand at $ 200 billion
The contraction in the market value of new digital assets is accompanied by increasing volatility in traditional financial markets such as equities, offering traders other opportunities to profit from fluctuating prices.
"The uproar is gone, the types of bettors and traders have gone," said Simon Taylor, formerly Barclays VP and co-founder of the financial consulting firm 11: FS.
Bitcoin, the original and most valuable cryptocurrency, has plummeted from $ 19,000 in December to reach a range between $ 6,000 and $ 8,000 since June. But supporters see the bitcoin, which unlike fiat coins is not controlled by a central authority, as a store of value. But his brief history was marked by rapid rallies and sharp drops.
Scott Weiss, a lawyer from Arizona, bought his first bitcoin at its highest price in December. "I'm not a professional investor, I'm a lawyer," he said, reflecting on his losses. "These are the types of mistakes we make." We remain involved in the advertising campaign. "He is firmly convinced.
Attempts to open funds exchanged in exchange for bitcoins, which the supporters of cryptocurrency hope to represent a fundamental step towards wider adoption, have so far been coldly tackled by the United States. regulatory authorities. The Winklevoss twins, the first Facebook investors who manage Gemini to exchange cryptocurrencies, were among those rejected.
In the City of London, the online retail industry, whose profits had fallen in stock markets closed last year, caught the volatility of well-known digital assets like bitcoin and ether, its closest rival. By offering derivatives based on cryptography and making betters pay heavy commissions to trade them, many profited generously. Plus500 recorded an increase in earnings of 418% compared to the previous year in the first quarter of 2018, citing "high levels of interest" in its cryptocurrency products.
Both the IG Plus500 trading company and the FTSE 250 recognize the interest of the now reduced cryptocurrency trading. "Bust is the word," said Peter Hetherington, CEO of IG.
With the collapse of prices, bitcoin investors have withdrawn to hold, suggests the research of Unchained Capital, a start-up that lends money against cryptocurrency.
Bitcoin's slide coincided with the introduction of bitcoin futures contracts by CME Group and Cboe Global Markets, which provided cryptocurrency investors for the first time with a hedging opportunity allowing at the same time operators to bet on the downside of the bitcoin price.
The once-collapse of the new digital currencies fiercely exchanged since 2017, with names like DentaCoin and SpankChain, has also sucked up the money from the overheated market.
Entrepreneurs had created hundreds of tokens in the so-called "initial coin offerings" (ICO), barely regulated fundraising vehicles that unlocked money holdings mostly held by retail investors – an attractive proposition for both entrepreneurs of the initial phase and get rich quick. "Who does not want to print money for free?" Commented Michel Rauchs, leader blockchain and cryptocurrency at the Center for Alternative Finance of the University of Cambridge.
Telegram, the messaging app, has raised a record of $ 1.6 billion in cash from investors to finance the development of its cryptocurrency.
Although tokens do not offer protection to investors, many bettors have enjoyed a quick appreciation of their cryptographic holdings while others have stacked them. Merchant groups coordinated to pump the price of coins subtly traded and took advantage of selling them at artificially high prices. At the beginning of January, the apex of the cryptocurrency, at least 39 digital currencies had market capitalizations of $ 1 billion or more.
"We now realize that many of these tokens do not feed any useful applications, and if they do, there are only a handful of users," Rauchs said. As speculative mania has eased, only 15 coins currently have a market capitalization of $ 1 billion, according to CoinMarketCap. DeadCoins.com lists the abandoned tokens
"The days it was invested in an ICO and it went 75x in six months," said Ari Lewis, who opened the cryptocurrency hedge fund Grasshopper Capital in August 2017.
An investor with personal cryptocurrencies worth tens of millions of dollars said that while he continued to buy and hold bitcoins, he had thrown away coins that were popular trades last year, including XRP, the third bigger.
Securities regulators, fearing unacceptable losses to consumers, have blocked ICOs.
Still, supporters of cryptocurrency emanate optimism.
The eToro trading platform, known for its bold cryptocurrency ads on the London Underground, is not reducing its marketing despite the crash, said Etq's CEO Iqbal Gandham.
Jordan Fried, vice president of global blockchain business development, start-up Hedera Hashgraph, who raised $ 100 million from institutional investors, said the speculative rush provided some legitimate early-stage companies with capital to build services to support the nascent cryptocurrency industry.
"Many of these paid frat boy entrepreneurs to bring private jets to Mykonos," he said. "But it is helping us to build an infrastructure".
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