The cryptocurrency market has had a terrible week, as it lost big on its market capitalisation. Trading volume has declined, and a top might be associated with Coinbase’s IPO.
Ever since Elon Musk announced that Tesla wouldn’t accept Bitcoin as payment for the purchase of its vehicles, the cryptocurrency market has fallen. Bitcoin dropped below $40k in early Wednesday morning trading, down 9% in just a few hours. Ethereum, another cryptocurrency that outperformed even Bitcoin in the last few months, dropped 14% in a similar interval.
While it appears that Musk triggered the bloodbath in the crypto assets, one must look beyond Tesla’s announcement. In the last few months, the cryptocurrency market has gone “to the moon”. The crypto trading volume surged to a market capitalisation of above $2 trillion.
Most of the institutional investors brave enough to search for diversification into the digital space have opted for Bitcoin or Ethereum. But the retail traders do not afford such prices as $50k or $3k for Bitcoin, respectively Ethereum. Therefore, most of the retail’s capital was in the so-called “shitcoins”, with names like SCAM, Shiba Inu, or Wazir X, just to give some examples.
Coinbase’s IPO Marked the Top of the Cryptocurrency Market?
April 14th marked one of the most-awaited IPO’s in 2021 – Coinbase. Coincidence or not, since then, Coinbase shareholders saw the value of their common shares decline constantly.
We may say that, as ironic as it sounds, Coinbase’s IPO marked the peak of the cryptocurrency market frenzy. After all, the shares almost halved in value in about a month, just like Bitcoin did, by dropping from over $60k to close to $30k in a matter of just a few days.
Regulation Concerns Weigh
On Wednesday this week, China delivered another blow to cryptocurrency fans. The People’s Bank of China (PBOC) issued a statement saying that cryptocurrencies should not be used in the market as money for the simple reason that they are not a real currency.
In addition, India suggested that it is looking into regulating the cryptocurrency market, too. Finally, it transpired that the ransom for the Colonial pipeline attack was paid in Bitcoin.
All in all, a dark week for cryptocurrencies, as reflected in Coinbase’s chart. How much of that market capitalisation was lost in just a few trading days?