The digital currency markets experienced widespread price declines today, as concerns surrounding the latest developments in China motivated many traders to sell off not only bitcoin, but alternative digital assets.
The development follows the PBoC's announcement today that it warned several domestic exchange operators that they must comply with regulations or risk being shut down. Traders also received startling news from major operations Huobi and OKCoin that, effective immediately, they would suspend bitcoin withdrawals for one month.
The digital currency then recovered, rising to $975.21 at the time of report.
Yet, even after this increase, bitcoin prices were still roughly 7.5% lower for the session, BPI figures show.
Even in alternative digital asset markets, the impact of the development in bitcoin was widely felt.
Ether, which powers the smart contract-based platform ethereum and is the second-largest cryptocurrency by market capitalization, fell to as little as $10.67 on CoinMarketCap, down close to 7% since the start of the day.
The digital token then recovered lost ground, reaching $10.92 at the time of report. Yet, even after making these gains, ether was roughly 4.8% lower for the session at time of writing.
Ether classic, which was created roughly six months ago as a result of an ethereum hard fork, provided the most striking example of a price decline, dropping upwards of 20% for the day to $1.20 on CoinMarketCap, after trading at $1.47 at 12:04 UTC.
The digital currency, which helps power the smart contract-based platform ethereum classic, later rose to $1.28 at the time of report.
At this price, ether was roughly 12% lower for the day.
Monero, a digital currency that leverages ring signatures to help provide market participants with a high level of privacy, fell to as little as $11.83 during the day, close to 8% below the price of $12.83 at 12:04 UTC, according to CoinMarketCap.
At the time of report, the digital currency had recovered slightly, trading at $11.91, still more than 7% lower for the session.
The fact that digital currency prices suffered widespread declines today, and then proceeded to recover, is merely part of a broader trend, Jacob Eliosoff told CoinDesk.
He emphasized that in some cases, news that bodes poorly for bitcoin "may actually help (or at least be neutral for) other major coins." He pointed to a bug in bitcoin's blockchain or a major disagreement between bitcoin developers as potential examples.
However, news that causes bitcoin prices to push lower usually has the same effect on the price of altcoins, he said.
The high correlation that exists between the price of digital currencies may simply be a sign of the market’s immaturity. Bitcoin was the first cryptocurrency to scale, and has grabbed the lion's share of the total market capitalization owned by these digital assets. (In most cases, you have to buy bitcoin before purchasing other altcoins).
Watch and wait
However, several altcoins have risen to prominence by offering some compelling value not provided by bitcoin.
Ethereum, whose currency ether had a market capitalization of roughly $970m at the time of report, has drawn interest by offering developers a platform where they can create applications that rely on smart contracts.
Likewise, Monero, the fifth-largest digital currency by market capitalization according to CoinMarketCap, has carved out its own niche by offering a level of privacy far higher than that of bitcoin.
In this way, Eliosoff and others are hoping that the "extreme correlation" that exists between the prices of digital currencies today will diminish over time as more establish singular use cases and establish unique infrastructure.
As evidenced by today's moves, however, this development remains in the distance.
Dominoes image via Shutterstock
CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.