In the first quarter of 2018, bitcoin has shed more than half of its value. On March 31 it closed at 65 percent below its all-time high exchange rate of USD 20,089 which it had attained on December 17, last year.
The world’s most valuable cryptocurrency opened the first quarter at USD 14,112 and closed it at USD 6,973, reaching a quarter high of USD 16,537 on January 8. The currency has also lost USD 119.9 billion in market cap in this period.
The loss is despite, in the same period, the circulating supply of bitcoin grew by 174,038 coins, i.e., from 16.77 million to 16.95 million.
The market capitalisation is highly dependent on circulating supply of the asset in cryptocurrency market. At a constant price, higher the supply, greater the market capitalisation.
A similar trend was also witnessed in other crypto assets as the overall market cap of the cryptocurrency market sank to USD 270 billion from USD 612 billion at the start of the quarter.
A barrage of bad news
The major reasons which can be attributed to the crash of bitcoin in the first quarter of the year include regulatory whips which cracked in many countries and the reports of multiple hacking at exchanges as well as cryptocurrency firms.
Financial regulatory authorities across the world, primarily in South Korea and Japan came cracking at the cryptocurrency market as they feared diversion of funds from investors to evade taxes. The authorities also alleged that anonymity which the cryptocurrency market guarantees, aids illegal activities.
South Korea while at one point considered an outright ban on bitcoin, Chinese central bank reportedly pondered over cutting power supply to the bitcoin miners to curb its production.
Brazil also gave a jolt to the investors as it banned funds from investing in them.
Also Read: South Korea says uncovered about $600 million in cryptocurrency crimes
The Indian government also declared that it will never accept bitcoin or other crypto assets as legal tender in the country. Top lenders across the country suspended accounts of major bitcoin exchanges even as the RoC stopped registration of firms dealing in them.
The barrage of such discouraging reports dampened the mood of the market and a strong bearish trend gripped it which the market is yet to shake off.
Hacking
A number of hacking incidents at major cryptocurrency firms across the globe also made investors cautious as they avoided taking the risk of losing their money to thieves.
Among the hacks in the first quarter in 2018 included the biggest crypto heist in the world on Japanese exchange Coincheck in which worth over USD 500 million were stolen. Recently, another cryptocurrency exchange based in Hong Kong reported a hacking attempt.
Also Read: Hacked Japan crypto exchange refunds customers
All these reports combined eroded the confidence of investors in the cryptocurrencies and they started pulling out their investments.
However, all said, a glimmer of hope remains as the past data suggests that bitcoin has the tendency of recovering from steep dives. In its nine years of existence, bitcoin has seen a short-term correction of more than 70 percent at least once before.
Moreover, there have been numerous instances, more than two every year, when the currency has dived more than 30 percent only to recover later. In some instances, the value of bitcoin dived about 66 percent in a span of few days.
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