It was a very negative beginning of the week for cryptocurrency holders as the entire market experienced a significant decline in price.
August 1 is near
Market analysts have come up with different factors to be behind this significant decline in Bitcoin and altcoin price. Ironically, this comes immediately after the G20 summit in Hamburg where reference was made to digital currency as an important technology in the global economic transition.
Also of note is that the community is nearing an important date of August 1 when Bitcoin is expected to make its most crucial decision since creation. Certain groups have also attributed this decline in price to technical factors lifted from the study of price charts, making predictions based on historical market behavior.
Whatever the reason, the fact remains that the crypto market keeps getting more traction as the days go by. The numerous activities taking place within the industry since the beginning of 2017 must be considered if the prevalent market volatility is to be analyzed properly.
ICO cashouts plays a role in decline
Founder of Cashaa (Auxesis Group), Kumar Gaurav believes that the price decline is likely to be only temporary, as there is no negative factor influencing the price. However, Gaurav notes that a major factor for the recent decline is the huge success of ICOs, frequently named Ethereum`s “first killer app.” This resulted in people cashing out large amounts of Ether, which in the past weeks dropped from $420 to $200, with the panic spreading to other cryptocurrencies, to a lesser extent to Bitcoin, as Ether is normally cashed out to Bitcoin or fiat.
Gaurav explains to Cointelegraph:
“It could be directly seen that Ether sharply dropped after large ICOs in June like Bancor ($150 mln) and Status ($100 mln). Due to ICO investors likely to have some Ether already from its almost three years in existence, having become rich on the way and now happy to spend it on nearly any ICO.”
He continues by explaining that the amount of Ether bought now just to participate in an ICO is less than the cashed out Ether raised in the same ICO afterwards, making any successful ICO a possible risk for the price.
Another possible factor for the decline is large ICOs overwhelming the Ethereum network, making it unusable for regular users.
Heading upwards
Netcoins CEO, Michael Vogel tells Cointelegraph that the recent market volatility is as a result of general investor fear and uncertainty. Vogel also acknowledges that there is still a lot of upside potential for Bitcoin.
Vogel says:
What we've seen in the past six months is an amazing amount of wealth being created in the cryptocurrency space. That has led some to use the word "bubble," although in my opinion with Bitcoin we're nowhere near bubble territory - in fact, Bitcoin still has massive amounts of upside. General investor fear and uncertainty is leading to the huge volatility that we're seeing now. August 1 will certainly bring clarity to the situation (especially with how Bitcoin relates to other cryptocurrencies), and that clarity should remove much of the market uncertainty.
However, overall, as of writing, nearly all cryptocurrencies are recovering, including Ether having gained six percent in the past 24 hours.