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Highlights
- On Tuesday, the total crypto market cap fell to US$2.6 trillion – a loss of around US$200 billion in 24 hours
- The cause of the latest dip is largely unknown but many claim that a correction in the market is normal following a new all-time high
- if more negative news on the market is published, it would potentially have an effect whereby more sell offs will occur – a chain reaction born out of a self-fulfilling prophecy
Is history about to repeat itself? The past few days have seen the crypto market lose hundreds of billions of dollars, which has compelled some experts to worry that this might result in a domino effect – something the market experienced around six months ago.
The question is whether this correction will be a catalyst for a chain reaction that will see further billions wiped of crypto’s market cap.
The Story This Week
On Monday, the total crypto market cap was US$2.87 trillion, following a week which saw that figure reach an all time high of just under US$3 trillion.
Things really began to take a tumble on Tuesday, when the total crypto market cap fell to US$2.6 trillion – a loss of around US$200 billion in 24 hours.
On Wednesday, that number had reached US$2.47 trillion – a loss of over half a trillion since its all time high last week.
Since then, the market has bounced back, somewhat, and is US$2.63 trillion at the time of writing.
What Is The Cause?
The cause of the latest dip is largely unknown but many claim that a correction in the market is normal following a new all-time high.
However, this could be cause for concern because the last time the market hit an all time high in May, this year, the market lost around a trillion dollars with many major cryptos, including Bitcoin, losing more than half their value.
Many blamed the mid-year crash on the Chinese government clamping down on crypto regulation in China, ordering financial institutions to cease offering crypto services and even banning bitcoin mining.
Perhaps it’s not surprising that people are again pointing the finger at China - and their ongoing resolve to stamp out cryptocurrency once and for all - for the most recent market correction.
Image Source: © Eamesbot | Megapixl.com
The Domino Effect
The loss of market cap in the crypto space is due to investors selling off their digital assets.
While the catalyst for sell offs may well be speculation over things like Chinese government crackdowns and its potential implications, experts fear a major crash will be a result of a chain reaction where sell off begets sell off.
Walid Koudmani, an analyst at XTB Market told Bloomberg that if more negative news of the market is published, it would potentially have an effect whereby more sell offs occur – a chain reaction born out of a self-fulfilling prophecy.
The Bottom Line
With inflation reaching record highs and likely to continue at least in the short-term, crypto has the potential to become a store of value for investors.
So, many investors will likely want the market to hold its ground amidst the current correction.
But as we’ve previously seen, the sell-off game can be a very slippery slope.
