The cryptocurrency market is a sea of red today, a development skeptics will no doubt quickly use to make the case against bitcoin as a 21st century gold.
In times of economic or political stress, investors prefer to hold safe haven assets, and while many experts believe bitcoin is the new safe haven, today's dismal performance contradicts such claims. The cryptocurrency dropped 5 percent over the last 24 hours, even while North Korea's nuclear test and heightened geopolitical tensions pushed up traditional safe haven assets like gold, Japanese Yen.
Overall, bitcoin (BTC) clocked an intraday low of $4,253 earlier today, and was trading around $4,335 levels on news China has banned initial coin offerings, one of the main trends powering this year's boom.
Still, the price decline comes amid an uptick in trading. CoinMarketCap data shows volumes on Bitfinex, which offers trading in the BTC/USD pair, are up 7.11 percent.
Ethereum (ETH) was the biggest loser among the top 10 cryptocurrencies, down 12.14 percent in the last 24 hours, as it remains the platform of choice for most ICOs. Bitcoin Cash (BCC) had also shed around 3.7 percent and was last seen trading around $554.
So, what should we make of the day's developments?
As the December 2016 close on the CoinDesk BPI was just under $1,000, the cryptocurrency has still rallied more than 400% this year.
Following a rally of such humongous proportion, a healthy correction is much needed as it serves two purposes:
- It will calm market nerves – Pundits have started comparing bitcoin mania to the 16th century Tulip bubble. A correction here would calm market nerves and help restore confidence in the bitcoin rally.
- Is heightened curiosity for real? The stellar rally in bitcoin led to increased curiosity about bitcoin and crypto space in general. Investors who missed out on the rally would want to board the bitcoin freight train during a technical pullback. Strong dip demand would indicate the heightened curiosity is for real… investors are not just curious but are willing to allocate a part of their portfolio to virtual currencies. Weak dip demand or absence of dip demand would be bad news.
Bigger uptrend is still intact
Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.
Toy airplane image via Shutterstock
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.