Reports show that the Bitcoin January drop has erased $44.2 billion from the currency’s total value that is approximated at $200 billion.
This January, Bitcoin has undergone a series of challenges that have seen it shed almost 30% from the start of the year. This goes on record as the biggest ever dollar loss within a single month for a digital currency.
This comes as quite a shock to many in the crypto community as the currency reached an all-time peak of almost $20,000 only a month prior when futures contracts were introduced on major platforms.
“Once we got to $10,000, crypto had adopted this Teflon persona of late that it’s always going to find a base and go back up again”, says the Head of Asia Pacific Trading at Oanda, Stephen Innes.
The previous record loss was reported in September last year when the coin lost $6.4 billion after China imposed a ban on ICOs and crypto trading within the country. This led to a significant sell-off as market players feared that the crackdown on this major market would debilitate the currency completely.
Bitcoin also had another major sell-off in June of last year when developers could not agree on a scaling solution. It was trading at around $3,000 at the time but rumors that there would be a hard fork on its blockchain unsettled some in the community leading the coin to drop by 36% to a value of $1,869.
The most ironic part of this crash is that when the fork did materialize in August, there was no major harm done to the Bitcoin ecosystem.
This January is no exception to the rule as speculation has accounted for all of the currency‘s nosedives. The most significant causal factor was the rumor that South Korea would ban cryptocurrency trading altogether.
Fortunately though, the authorities soon offered a clarification on this explaining that anonymous trading is what would no longer be allowed in the market.
Regulations Take a Toll
It is evident though that the implementation of this new rule on January 30 has also had an adverse effect on the market. Trading in South Korea is proving difficult for exchange platforms as they allege unfair treatment from mainstream financial institutions.
According to the rule, all virtual trading accounts must match the identity details in existing bank accounts. However, it is reported that banks have decided to offer a new virtual account to service to specific platforms which include Bithumb, Upbit, Coinone and Cobit.
This leaves the rest in limbo and means that their users can not trade until the situation is rectified which in turn has a negative impact on the market as a whole.
This is why according to Innes, the road to Bitcoin’s recovery is going to be bumpy. He said:
“When we’re talking in the realm of riskier assets, and something sheds off 50% of its value, it tells me there’s going to be an extension lower. The sad thing is a lot of people will get burned, because they will continue to buy dips.”