The cryptocurrency market has experienced a considerable selloff, with Bitcoin, the world’s largest digital currency by market capitalization, plummeting to its lowest price in over a year.
There are numerous reasons that have led to the bearish sentiments on the market, but despite the value of Bitcoin and other major cryptocurrencies continuing to fall earlier this week, the market moved back into the green Thursday, with the majority of digital currencies advancing to make up the recent losses.
As Bitcoin jumped 3.13 percent to $4,628 while managing the daily trading volume of $7.5 billion, other so-called altcoins such as Ethereum and XRP followed suit and registered significant upticks. Out of the top cryptocurrencies, Bitcoin Cash (BCH) registered the highest increase of more than 11 percent.
However, the bears piled the pressure on and the week has ended with a new 2018 low for Bitcoin, falling below $4,200 on Friday, taking the entire crypto market down with it.
Ethereum plunged 8 percent to $125, with analysts forecasting the price to drop below $100 in the coming weeks.
As history has shown, the prevailing crypto market volatility has been experienced many times before, but sudden drops in value can catch investors off guard.
Therefore, more and more investors are turning to pioneering technology such as algorithms to protect themselves from the volatility. The algorithms allow investors to take advantage of the positive aspects of the digital assets market, but with decreased volatility.
When the price of one digital currency, such as Bitcoin, is higher on one platform than another, the opportunity is acknowledged to generate profit from the price differentiation across platforms.
As such, these trades, known as arbitrage, allow profit to be made, but with minimal directional market risk.
Indeed, such ground-breaking technology has created opportunities in crypto markets that haven’t been seen in conventional markets for years.
The arbitrage possibilities are abundant, with the prices of the top 25 cryptocurrencies varying over 400 liquidity venues.
As a result, the ability to trade long and short results in profit possibility, regardless of the direction of the market.
As we’ve seen, this latest sell-off underscores the volatility within the cryptocurrency market. Looking back to 2017, Bitcoin became a household name when its value rocketed from $3,600 per coin to around $20,000. Then its price dropped back to $7,000 in February this year and has been up and down ever since.
However, a large number of crypto analysts are of the opinion that Bitcoin will eventually replace gold, with digital assets as a whole of utmost relevance in an increasingly digitalized world.
That said, although I am confident that the cryptocurrency sector will increase 5,000 per cent over the next 10 years, I don’t think Bitcoin’s sovereignty over the sector will be as prominent over the next decade.
This is mainly because we’ll see more and more cryptocurrencies being introduced by both private and public sector organizations as mass adoption of digital currencies soars, which will heighten Bitcoin’s competition and dint its market share.
Yet, as I’ve said on numerous occasions, cryptocurrencies are the future of money, and whether it is Bitcoin or any other existing or yet-to-be released coin that will take center stage, digital currencies are here to stay.
Nigel Green is founder and CEO of deVere Group. One of the world’s largest independent financial advisory organizations, de Vere does business in 100 countries and has more than $12 billion under advisement.
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