The 2018 cryptocurrency bloodbath continued on Monday, with bitcoin prices tumbling another 7.8 percent. Bitcoin prices are now below $5,200 for the first time since October 2017, and even bitcoin bulls admit that cryptocurrency pessimism seems to be gaining momentum.
Bitcoin is now down 61 percent year-to-date, and other popular cryptocurrencies such as Ethereum and XRP have taken an even larger hit this year.
Recent cryptocurrency market weakness appears to be tied to confusion surrounding last week’s “hard fork” of bitcoin competitor bitcoin cash. Bitcoin cash developers and miners were unable to agree on the cryptocurrency’s latest software upgrade, so bitcoin cash split into two seperate cryptocurrencies, bitcoin ABC and bitcoin SV. Bitcoin cash was created last year after splitting off from the original bitcoin in a similar fashion.
Last week’s bitcoin cash fork created confusion for cryptocurrency investors and exchanges about how the changes would impact prices and the cryptocurrency futures market.
One of the major hurdles cryptocurrencies must clear to reach large-scale adoption is convincing average investors and users that cryptocurrencies are safe and stable investments. A complicated, contentious and confusing fork in bitcoin cash doesn’t help that cause.
In August, the U.S. Securities and Exchange Commission rejected nine cryptocurrency exchange-traded fund proposals from ProShares, Direxion and GraniteShares. The SEC has yet to approve any cryptocurrency funds for major listings on U.S. exchanges due to concerns about market liquidity and investor safety.
While the bitcoin cash fork certainly spooked the market, DataTrek Research co-founder Nicholas Colas says there is evidence fundamental enthusiasm for bitcoin has waned, at least for now. “Bitcoin wallet growth actually slowed in October, and Google search trends remain in the cellar,” Colas says. “This group will eventually experience a renaissance, but for now it remains in the dark ages.”
Even one of bitcoin’s most enthusiastic bulls, Fundstrat analyst Tom Lee, says bitcoin is facing an uphill battle in the near term.
“While bitcoin broke below that psychologically important $6,000, this has lead to a renewed wave of pessimism,” Lee says. “But we believe the negative swing in sentiment is much worse than the fundamental implications.”
Lee says he is still extremely bullish on bitcoin in the long term, but he has cut his year-end price target from $25,000 to $15,000.
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