Bitcoin prices plunged below $5,000 today, extending losses suffered earlier this month and causing the digital currency to decline 75% from its peak.
The cryptocurrency reached as little as $4,951.47, its lowest in more than one year, according to CoinDesk price data.
The world’s largest digital currency by market capitalization (market cap) has been struggling through a sustained bear market, prompting countless market analysts to wonder when it will break free of this weakness.
A handful of notable events have drawn significant interest lately, specifically the bitcoin cash hard fork and the ICO market’s continued difficulties.[Ed. note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Bitcoin Cash Hash War
Bitcoin cash recently underwent a hard fork, splitting into bitcoin cash ABC and bitcoin cash SV, two distinct blockchains with different rules.
Craig Wright, the self-proclaimed creator of bitcoin, threw his support behind bitcoin cash SV, and Roger Ver, another highly visible proponent of digital currency, backed bitcoin cash ABC.
“The bitcoin cash fork has left bad blood in the industry,” said Charles Hayter, cofounder and CEO of digital currency data platform CryptoCompare.
Hayter was not alone in espousing this point of view, as said Joshua Frank, cofounder of cryptocurrency analytics platform TheTIE.io, also emphasized the effects of this event.
“Interestingly, we saw the long-term sentiment of Bitcoin drop negative on November 7th, and the sentiment has continued to fall following Bitcoin’s price plunge on November 14th,” he stated.
“It does not look like there has been any positive recovery in longer-term sentiment since then,” added Frank.
He elaborated, emphasizing how this turmoil has affected the digital currency markets.
“The Bitcoin Cash fork, and the infighting within the crypto community has definitely had a negative impact on price,” he stated.
“The conversation around the fork is negative, which is an overhang on the overall market.”
Further, he added that “We see conversations around the BCH fork making their way into discussions around all cryptos across the board.”
ICO Market Challenges
The market for ICOs has been suffering lately, and many investors have become spooked as the U.S. Securities and Exchange Commission (SEC) continues to crack down on these innovative sales of digital tokens.
On Friday, the SEC announced that it had settled with Airfox and Paragon Coin Inc., which held ICOs after the government agency warned that the digital tokens sold through these offerings might be classified as securities.
The two companies, which both raised more than $10 million apiece through ICOs, had to pay fines and remunerate investors who suffered losses.
These latest actions have taken place at a time when many ICOs are in the red, meaning that the investors who bought their tokens have lost money.
Professional services firm Ernst & Young highlighted this in an October report, stating that 86% of ICOs whose tokens listed on exchanges saw these digital assets lose value.
Interest In ICOs Has ‘Quickly Dissipated’
Frank emphasized how investor attitudes toward these token sales have changed significantly.
“When we began tracking crypto sentiment last year there was a massive demand among both individual and institutional investors to track ICO sentiment,” he stated. “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,” said Frank.
“There is clearly fear that the crackdown on Airfox and Paragon is just the beginning,” he concluded.
Fortunately, there is an upside to the recent SEC involvement, as greater regulatory certainty could help bolster confidence in the digital currency space.
Mati Greenspan, senior market analyst for social trading platform eToro, spoke to this.
“The SEC settlement from Friday was actually good news as it shows a more supportive outlook on crypto startups in the USA,” he stated.
The government agency’s latest “moves” are a positive development, Hayter concurred.
They represent progress toward having “clear cut tried and tested processes” for the methods that cryptocurrency firms use to raise funding.