The leading cryptocurrency Bitcoin fell in value by 12 per cent on Wednesday, sinking to a new low for 2018. With a price pushing $20,000 in December 2017, the coin dropped from $6,400 to $5,600 over the course of 24 hours. Other leading cryptocurrencies Ethereum and Litecoin faced an even worse bear run, falling 15 per cent and 17 per cent respectively.
Just as the market’s volatility levels were evening out, the major sell-off was sparked following news that Bitcoin Cash – separate to Bitcoin – is going to split in to two separate coins, according to CNN.
Bitcoin Cash was developed by Bitcoin miners who were concerned with the limitations of Bitcoin’s scalability as it takes nearly 10 minutes to complete a single transaction. To reduce congestion on the blockchain, a hard fork was initiated which creates a new path and diverts traffic to speed up the process of trading. Since its launch, the two coins now trade separately, however Bitcoin Cash is said to be going through this process again. Disruptions like this causes a wave of concern and in this case has resulted in a sell-off.
There remains a significant level of uncertainty within cryptocurrency which introduces the potential for extreme volatility and risk to those who hold a long position, Jordan Hiscott, chief trader at Ayondo markets, said in a statement following the news.
Nigel Green, founder of deVere Group, said in a release that investors were caught off guard by the fall in Bitcoin’s price but added that it is likely to bounce back if history has taught us anything.
“Those who invested in our actively managed cryptocurrency proposition, which uses a pioneering algorithmic system, will have been shielded against this turbulence, and have actually generated profit from the short signals generated by the system,” said Green.
Cryptocurrency prices vary depending on the platform. This difference in price creates an opportunity for arbitrage, which deVere’s technology seeks to take advantage of.