The past few days have seen the crypto market bleed continuously with no end in sight. Even seasoned investors have been stunned by the ongoing bear market that has seen many crypto coins lose an average of 20 percent each day. Currencies like bitcoin have now lost over 75 percent, and many others have lost over 90 percent of their value since January. With the end seemingly not in sight, let us look at two main reasons that have caused the Coinmarket to slump.
The Bitcoin Cash clash has severely affected the Coinmarket
It’s the main reason why the Coinmarket has bled in ways never seen before. The issues began just before the contentious Bitcoin Cash hard fork occurred on Nov. 15. Since then the crypto-coin has attracted the attention of the mainstream. Two competing software-development teams have failed to agree on the best way to update the code as a result that has led to the network to split. This battle has contributed to bitcoin dropping to its lowest in more than a year.
Both camps have been adding to the amount of computing power they own so that they can support their software version. In turn, its supposed to help them win the so-called Nakamoto Consensus race. The team with the most computing support will win it.
Now according to a research conducted by Bitmex, the two camps, ABC and SV, are losing around $700,000 a day on expenses like electricity to run the mining rigs that are competing to process transactions. Also, they are losing an additional $1 million a day in lost opportunity cost by not having their computers mine BTC. This is according to an assessment done by Jimmy Song, a Bitcoin core developer.
Each camp has pledged to keep going until the so-called Hash War race has been won. According to Coin Dance tracker, ABC is currently ahead. However, the balance of power can still shift.
Commenting on the ongoing battle, Lex Sokolin, the global director of fintech strategy at Autonomous Research that is based in London said:
“Imagine a management takeover in a $100 billion company, which you could effect by directing your resources. There is prestige, reputation, and power that comes with being the main party responsible for deciding the vision and feature set of the future of money.”
The winner of the battle will get to make tweaks in the BCH software to their benefit. They will have control over factors like figuring how to mine coins more effectively. Other perks include being able to attract better developers, and also miners to join the pool. Also, whoever turns out to be the outright winner will have significant control over the related coin’s price.
According to Travis Kling, the founder of Ikigai hedge fund, the winner “can pump price. You can dump price. You can push the hash rate in one way or another.”
Also, according to data from Poloniex crypto exchange, the two coins, Bitcoin Cash ABC and Bitcoin Cash SV add up to something less than what BCH was before the fork. The situation now is contrary to what happened last year when Bitcoin Cash split from BTC where investors saw the prices of both coins appreciate.
Roger Ver, also know as Bitcoin Jesus leads the ABC group. Chinese cryptocurrency mining powerhouse Bitmain backs him. The SV group is led by billionaire Calvin Ayre and Craig White who once claimed to be the real Satoshi Nakamoto.
As it stands, the battle between the two camps is getting expensive for investors by the day.
The Continued SEC crackdown on ICOs is impacting the Coinmarket negatively
The Coinmarket is also suffering from the continued crackdown of ICOs by the SEC. On Nov.16, the agency announced that it had settled with Paragon Coin Inc and Airfox. The two companies held their ICOs after the SEC had warned that the virtual tokens sold through these offerings could be classified as securities.
The two companies managed to raise $10 million each. The SEC forced them to pay fines and remunerate investors who had suffered losses. The latest action has taken place at a time when many tokens are in the red meaning investors have lost money.
Frank of Ernst & Young says that investor attitudes towards token sales have significantly changed.
“When we began tracking crypto sentiment last year there was a massive demand among both individual and institutional investors to track ICO sentiment. That interest has quickly dissipated.”
“Both on Twitter and within our day-to-day business dealings it is clear that there is fear within the community that the SEC will continue to come down on ICOs for registration violations. There is clearly fear that the crackdown on Airfox and Paragon is just the beginning.”
It’s these two factors that are responsible for the Coinmarket to lose over $700 billion in value from its January peak.