The global market cap of all digital currencies briefly fell to around $300 billion yesterday, before slightly recovering at the time of writing to $330 billion.
Trading volumes are up this time to around $18 billion, in contrast to the early February sell-off when they reached a recent low of $12 billion.
All digital currencies are very much down, ranging between 5% and 10%, with some down 20% or more.
Out of the big ones, Ripple has seen the most brutal winter sell off. It’s market cap reached a level that was almost higher than bitcoin’s current market cap, at around $130 billion. Now, it has fallen to below $30 billion.
BCH has seen a brutal sell-off too, from around $70 billion to now just $16 billion. While ethereum, by comparison, has fared a bit better, just about halved from around $134 billion to now $60 billion.
The same applies to bitcoin itself to some extent, which has gone from around $330 billion to now $140 billion.
How they all will fare going forward remains to be seen, with the sell off being one of the most brutal in amounts involved, but somewhat in line with previous sell-offs in percentages.
It remains somewhat unclear why cryptos have a tendency to quickly rise, then just as quickly fall down again.
One reason might be that as this space is open to all, its price movements are directed more by retail investors, rather than institutional investors.
General sentiment, therefore, might play a bigger role than actual fundamentals as when price rises, others hold off from selling, leading to a lack of liquidity and therefore very fast price movements. And then vice versa.
The same does not apply in other markets due to market makers, or frontrunners. High frequency stock traders place bids and asks very close to the market price, hoping to make a profit from the small difference in price between the bid and ask.
That can be a very profitable activity, therefore it can be highly competitive. But in thin markets, the spread might be too high, and thus so too the risk, making the activity less appealing, thus making it less liquid.
That remains the case to some extent because although we are seeing trading volumes in billions, that’s still fairly tiny compared to the stock market or foreign exchange markets.
Such volatility therefore might continue until the institutional infrastructure is put in place. Making short term crypto investment very risky, but long term the picture might be different.