The cryptocurrency market has continued to slump over the past 24 hours, as major cryptocurrencies including Ripple, Ethereum, and Bitcoin Cash recorded over 20 percent in daily losses.
Since January 15, the market valuation of cryptocurrencies declined from $700 billion to $500 billion within a 48-hour span. In the past few hours, the cryptocurrency market demonstrated some signs of recovery, as the market cap of all cryptocurrencies combined increased from $450 billion to $530 billion.
“Bitcoin Decreased Little Bit, Altcoins Plunged a Lot”
The claims that bitcoin slumped by a small margin while smaller cryptocurrencies plunged in value are evidently false, given that major cryptocurrencies recorded larger losses in value than small cryptocurrencies in the market.
Bitcoin did decline by a small margin in comparison to Ethereum, Ripple, and Bitcoin Cash, but it also decreased by more than 15 percent. Since December, bitcoin has dropped from $19,000 to $11,000.
It is also incorrect to justify the recent decline in the market valuation of cryptocurrencies to the trading ban fiasco in China and South Korea. The Chinese government banned cryptocurrency trading in September 2017. Today, the Chinese market has barely any volume to impact the global cryptocurrency market in any way.
Many investors are currently concerned about the state of the market because of the abrupt fall in the value of cryptocurrencies. But, the cryptocurrency market regularly experiences 20 to 30 percent corrections. For instance, when the People’s Bank of China (PBoC) and the Chinese authorities banned initial coin offering (ICO) along with cryptocurrency trading in September, the price of Ethereum declined by more than 30 percent.
Two months before that, Ethereum suffered over a 50 percent decline, from $360 to $134. Given the massive corrections Ethereum, bitcoin, and Bitcoin Cash have experienced over the past few months, the recent correction is not the biggest correction the market has suffered in the past year.
Was a Correction Long Overdue
When the market valuation of cryptocurrencies in the market surpassed $500 billion in mid-December, Ethereum creator Vitalik Buterin stated that he is personally concerned with the valuation of most projects within the market.
He questioned whether the market and projects within it have done enough to justify the $500 billion market cap of the cryptocurrencies. While Buterin emphasized that cryptocurrencies like bitcoin and Ethereum have definitely provided enough services to the general public and consumers, they have not done enough to justify their market caps.
“So total cryptocoin market cap just hit $0.5T today. But have we earned it? The answer to all of these questions is definitely not zero, and in some cases it’s quite significant. But not enough to say it’s $0.5T levels of significant. Not enough,” said Buterin, sharing a similar sentiment as other Ethereum co-founders including IOHK’s Charles Hoskinson.
A major correction is healthy for the market which has been overflowing with projects with no substance as of late. Blockchain projects with no products and users have gained multi-billion dollar valuations, solely with poorly drafted whitepapers.