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Is the end nigh for Bitcoin, other cryptocurrencies?

Prices and transaction numbers have tumbled as digital assets lose their sheen and analysts are split on whether last year’s stellar run can be replicated

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Gulf News

Dubai: A post on a popular Facebook group on Litecoin (LTC) read: “What do I do? I just sold my LTC for a $8,000 [Dh29,384] loss and I’m shaking... I’m done [as] I can’t handle this anymore.”

Web feeds like these are popular nowadays as cryptocurrency prices, led by Bitcoin, have tumbled from their December peaks.

Litecoin prices have fallen by close to half their record high of $330, with the cryptocurrency last trading at $156. It’s market capitalisation has also fallen from $17 billion to $8.7 billion now.

The biggest cryptocurrency by value Bitcoin, which witnessed a stellar run last year to hit a peak of almost $20,000, is slowly losing its sheen, trading $7,861.38 on Thursday, while the number of Bitcoin transactions has also tumbled, according to data from blockchain.info.

Transactions fell to a seven-day average of 150,000-155,000 in February compared to the peak of 350,000 in mid-December.

“People are not preferring to trade as they are already in losses in Bitcoin and other cryptocurrencies. Now it’s more of a HODL view,” an analyst with Capital TA told Gulf News.

HODL — an acronym for ‘hold on for dear life’ — is a popular term used in the cryptocurrency world, and refers to holding the digital asset rather than selling it.

Konstantinos Anthis, head of Market Research at ADS Securities, said: “It was clear that Bitcoin needed a reality check after the surge in price last year and the correction during the first couple of months of 2018 served as a proving ground. What is good from investors’ perspective is that the sell-off didn’t justify the sceptics’ views that the price will go to zero when the first downtrend kicks off.”

Charles-Henry Monchau, chief investment officer at Al Mal Capital said: “There was just too much optimism on Bitcoin and [alternative] coins at the end of January and the excesses needed to be purged — this is precisely what happened in early February.”

Bitcoin prices, which were violently volatile in 2017, closed in on $20,000 after starting the year at $985. Prices started to tumble mid-December and since them the cryptocurrency has shed more than half of its value.

“We believe that price action will now normalise further as Bitcoin gains more widespread acceptance. Even though the elevated volatility is an inherent trait of this new asset class, we have an optimistic view of its future,” Anthis said.

Old highs

In any case, analysts are unsure if Bitcoin will be able to climb to its old highs.

“Whether we will see new highs this year is difficult to answer but what is more important is that now investors are more evenly divided between bulls and bears, which creates a better environment for trading opportunities to keep us interested over the next months,” Anthis added.

Along with Bitcoin, other cryptocurrencies such as Ethereum, Ripple, Litecoin, Carnado and Neo have also shed value on the back of minimal interest from traders.

For instance, Ethereum prices fell nearly 50 per cent from their December highs, while Ripple fell to $0.65 from $3.35 in early January.

“When markets are risk-off and investors are moving out of cryptocurrencies, they sell Bitcoin and alternative coins in the same way. Both get hit,” Anthis from ADS Securities said.

“If we are transitioning into or out of a risk-off environment there is still a view that Bitcoin, because of its size, is a ‘less’ risky option, and will therefore find more buyers than the alternative tokens,” he added.

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