Cryptocurrencies continued to demonstrate extreme volatility, as the market value of all digital currencies fell by more than $200 billion on Tuesday, fueled by concern that countries that serve as major cryptocurrency markets may impose strict regulations on them.
On Tuesday morning, when markets in London opened, the combined market capitalization of all digital currencies stood at nearly $654 billion. By that evening, market capitalization had fallen to a little more than $450 billion. The selloff included all major cryptocurrencies, including bitcoin, Ripple and Ethereum.
Experts think that the selloff was triggered by the belief that China and South Korea — both key cryptocurrency markets — may soon enact restrictions that could detrimentally affect these markets.
A senior member of China’s central bank on Tuesday recommended that the country ban all cryptocurrency exchanges. The banker also recommended that the government prevent businesses and individuals from providing services relating to cryptocurrencies. This came after a report the day before that said that the Chinese government would soon block local access to cryptocurrency exchanges, both in China and overseas.
South Korea is also considering restricting cryptocurrency exchanges. Park Sang-ki, who is the country’s justice minister, last week said that his department was planning on submitting a bill that would ban cryptocurrency exchanges in the country. Though since then the government appears to be backing down on the threat, at least for now.
Fernando Martinez, who is a trader at Hong Kong-based Octagon Strategy, insists that the selloff came in direct responses to the news of these threats.
Every one of the top 20 digital currencies suffered double-digit losses on Tuesday. Bitcoin was down more than 16%, while Ethereum and Ripple were down 20% and 26%, respectively. Lesser known digital currencies were down even more. Though the day could have been even worse. At the low point of trading, many cryptocurrencies had lost half their value.
The selloff of cryptocurrencies has been continuing into Wednesday, with bitcoin falling below what many consider to be a psychologically important mark of $10,000.