The crypto market has been on a tear for the past few weeks, with Bitcoin leading the charge and surging past one milestone after another. However, the market now appears to be cooling off, much to investors’ and traders’ dismay.
Losses Across the Board
At press time, the crypto market capitalization stands at $917.41 billion. This is a 17 percent drop in the past 24 hours alone, down from the record $1.1 trillion levels recorded on Monday. Top cryptocurrencies are also trading down on the day, with many fearing that the rally sustained over the past month might finally be coming to an end.
As expected, Bitcoin had led the rally and is now dragging other coins. The leading cryptocurrency crossed the $40,000 mark in the middle of last week, surging past $41,500 for good measure. However, its price eventually stabilized around $39,000 to end the week. While many investors hoped to see the rally continue, things haven’t exactly panned out.
Bitcoin is now trading lower than $34,000. Instead of another staggering run above $40,000, a drop to possibly the high $20,000s now seems like a more imminent possibility. Data from Coinmarketcap also shows that Bitcoin’s market cap had dropped by 16.08 percent. It currently stands at $584.7 billion.
Ether, the second-largest cryptocurrency, is also witnessing a notable fall. The asset started 2021 on a tear, reaching the $1,000 price peg for the first time since January 2018. Many attributed the asset’s growth to the frenzy in the decentralized finance (DeFi) space and its Ethereum 2.0 staking.
Sadly, the asset has dropped 15.38 percent in the last 24 hours and now trades at $936. Its market cap has plunged by 19.29 percent as well, dropping to $110 billion.
XRP, the third-largest cryptocurrency, is not any different. Last month, the Securities and Exchange Commission (SEC) slammed XRP’s developers, Ripple Labs, with a suit alleging that it violated the Securities Act of 1993 via its 2013 XRP Initial Coin Offering (ICO).
The lawsuit alleges that XRP is a security, setting the stage for a possible paradigm shift. Between the suit’s filing and January 6, XRP’s price plunged by 55.6 percent. The asset climbed after then, gaining over 20 percent before entering the weekend’s bloodbath. XRP’s $12.15 billion market cap is also an 18 percent drop over the past 24 hours.
Several other large-cap cryptos are also down. The ten largest cryptocurrencies have dropped by an average of 14.03 percent in the past day. Their market caps have also plunged by 13.67 on average.
Investors Hanging On
Price drops like these – especially those seen in Bitcoin – tend to make investors antsy. However, many institutional investors remain bullish on cryptocurrencies in the long term. Last week, investment banking firm Morgan Stanley increased its ownership in business intelligence firm MicroStrategy to ten percent.
MicroStrategy was one of last year’s big crypto winners, purchasing $425 million in Bitcoin when the leading asset traded around $10,000. Factoring in the gains from the past two months, the company should be sitting on a Bitcoin stash worth well over $1 billion.
With Wall Street getting more interested in crypto, we could see a repeat of 2020 where institutional players prop up the market. This correction could then be seen as a momentary blip.