Major digital assets in cryptocurrency market are lower for fourth straight day on Wednesday after a 6-day on-off downtrend, on tracking fall on Wall Street overnight, as a rout in the market underscores fears of severe fallout from the recent negative developments and continues to fuel broad risk-off sentiment.
As reported earlier, massive selloff volumes are still persisting as traders and speculators with highly leveraged positions has been selling off on the worry that falling prices amid the soured mood and prevailing negative outlook will further accelerate the reversal, adding to a long list of challenges facing digital asset holders in the $2 trillion plus market.
As of press time, Bitcoin (BTC) is changing virtual hands at US $41,500, Ether (ETH) at US $3,240, ripple (XRP) at US $1.51, Binance Coin (BNB) US $501, cardano (ADA) at US $1.94, Dogecoin (DOGE) at US $0.44, ChainLink (Link) at US $41, UniSwap (UNI) at US $34, Polkadot (DOT) at US $39 and Stellar (XML) at US $0.62.
It has not been the best of trading weeks for most cryptocurrencies which have consistently depreciated since Saturday night. Persisting selloff on the back of prevailing downtrend may take bitcoin further down to $20,000 to $30,000 in the coming weeks.
A combination of factors ranging from Elon Musk’s tweet games, market overvaluation, profit-taking, seasonal investor actions to China’s recent move to ban digital tokens as a form of payment has contributed towards the the market’s weakness and risk-off situation. China’s move might be followed by more countries in the near future as multiple central banks have recently raised concerns about the risky cryptocurrencies being seen as magic money generator.
A risk-off market means that the sentiment turns negative and traders and investors start reducing their exposure to risk and focus on protecting their capital.
China’s new ban which bars individuals from holding cryptocurrencies orders institutions, including banks and online payments channels not to offer clients any service involving cryptocurrency.
Although the upward traction in cryptos had run out of steam before that, the dramatic decline in bitcoin’s price started on May 13 when Elon Musk tweeted Tesla would stop accepting bitcoin as payment due to environmental concerns.
So such concerns about energy use of cryptocurrencies is far from limited to Elon Musk. There have been concerns for long time that there are hardly any environment-friendly cryptocurrency with substantial market cap at the moment despite extensive self-praise and preening by some as the high cost is actually required in the decentralised ledger to discourage malicious activity as it is a “trustless” network.
Further, there is overall realization and reflection among the long-term investors that most of the currently available cryptocurrencies will likely fail as they might be digital assets but they just don’t make a good currency. We have further explained it here.
The actual slowdown in the market takes its roots back to early May when President Joe Biden’s capital gains tax (CGT) hike hit the news, triggering cautious market sentiment which eventually let to high sell volumes.