Markets beginning to stabilize following massive week-long plunge.
Following a massive cryptocurrency surge the week prior, the emerging asset class took a massive dive last week as Bitcoin tumbled 44% from nearly $20,000 on December 17 to just under $11,000 Friday morning, taking altcoins across the board with it.
Fellow cryptocurrencies Etherium and Litecoin went from Sunday’s near $900 and $400 highs to $549 and $191 lows. In fact, Coindesk reported only three of the top 100 cryptocurrencies by market capitalization saw gains.
The influx of panic from traders fearing the dreaded “Crypto-winter” institutional investors have warned about caused cryptocurrency trading app Coinbase to temporarily disable trading Thursday night and again on Friday morning.
While it seems stabilization occurred throughout the holiday weekend, what caused the correction is up in the air.
David Drake, founder and chairman at LDJ Capital, a $1.5 trillion multi-family office, attributes the holiday shock to hedge funds reaping gains to boost their annual bonus.
“Hedge funds are taking profits because that’s what their bonus is based on. And we know that hedge funds like Pantera [Capital] (cryptocurrency hedge fund) took a huge exit of holdings the last five days,” Drake told CIO. “We will see more of these next year.”
As for the crypto-winter theory, Drake doesn’t see it happening anytime soon. He noted that these 20-30% market fluctuations have been occurring throughout the year and that cryptocurrency will again experience a hard rally in 2018.
“This is been happening several dozen times this whole year; the whole market fluctuates 20% to 30%, and now that there are so many more hedge funds in the space, you can see higher fluctuations, and this is not a market correction,” he said. “We will absolutely rally back because everybody else has bought crypto until now…except for the Forex Traders and the day traders in the cryptocurrency Traders.”