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Bitcoin Just Plunged Another 12% -- What's Behind the Decline?

By Matthew Frankel, CFP® – Nov 19, 2018 at 5:03PM

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The largest cryptocurrency by market cap dipped below $5,000 for the first time in more than a year.

The cryptocurrency market is under pressure yet again on Monday after a dismal performance last week, with most major digital currencies down sharply. In fact, excluding currencies that are tied to the U.S. dollar, all of the top 50 cryptocurrencies are in the red today.

Leading cryptocurrency bitcoin (BTC-USD) is no exception. Bitcoin's token price dipped below $5,000 for the first time in over a year and has now lost nearly 75% of its value since peaking at almost $20,000 in late 2017. So, why is the cryptocurrency market performing so poorly?

Stacks of gold coins with bitcoin symbol.

Image source: Getty Images.

Today's cryptocurrency prices

Before we get into the potential reasons for today's slide, here's a quick look at the prices of the 10 largest cryptocurrencies (excluding U.S. dollar-denominated tokens) and how they're performing.

Cryptocurrency Name (Code)

Price in U.S. Dollars

Today's Change

1-Week Change

Bitcoin (BTC-USD)

$5,083.50

(11.6%)

(21.1%)

Ripple (XRP-USD)

$0.50

(3%)

(4.9%)

Ethereum (ETH-USD)

$155.07

(15.3%)

(26.8%)

Bitcoin Cash (BCH-USD)

$322.14

(13.1%)

(33.9%)

Stellar Lumens (XLM-USD)

$0.23

(8.9%)

(14.9%)

EOS (EOS-USD)

$4.16

(10.8%)

(23.7%)

Litecoin (LTC-USD)

$37.49

(16%)

(27%)

Cardano (ADA-USD)

$0.05

(15.9%)

(29.7%)

Monero (XMR-USD)

$76.13

(18%)

(28.7%)

Tron (TRX-USD)

$0.016

(16.6%)

(28.3%)

Data source: www.investing.com. Prices and daily changes as of November 19, 2018, at approximately 3:20 p.m. EST, and prices are rounded to the nearest cent where appropriate.

Why are bitcoin and other cryptocurrencies plunging?

To be perfectly clear, today's decline isn't due to any specific news item. In fact, the only major news item involving cryptocurrencies recently is the "hard fork" in the bitcoin cash (BCH-USD) blockchain that occurred last week and stirred up some controversy within the cryptocurrency community.

While this could certainly put some degree of downward pressure on the markets, I have a tough time believing that a hard fork in one cryptocurrency that makes up less than 4% of the total crypto market cap is solely responsible for a decline of tens of billions of dollars in value across the entire space.

So, what else could be causing today's decline?

Many experts are attributing the sell-off to purely technical reasons. In bitcoin's (BTC-USD) case, since bitcoin had been relatively stable in the $6,000 to $7,000 range for some time, there could have been pre-programmed stop-loss orders to sell if the token's price dipped below the $6,000 level. Also, more sellers than buyers would certainly drive the price down.

Furthermore, while regulatory uncertainty was a big factor in the cryptocurrency declines we saw earlier this year, particularly surrounding what actions the SEC might take, this issue has come back into the headlines. While it doesn't specifically affect bitcoin or any of the major cryptocurrencies, the SEC recently announced its first penalties related for initial coin offering, or ICO, violations. Additionally, the SEC has made clear that any cryptocurrencies besides bitcoin and Ethereum (ETH-USD) are securities and will be regulated, although the how is still somewhat unclear.

And finally, the market could be growing impatient with the lack of a cryptocurrency ETF that would allow investors to buy digital assets without directly owning them, and without paying exorbitant fees. At the end of the day, a continuous inflow of investor money was the reason for 2017's massive gains in bitcoin and other cryptocurrencies, and it is widely thought that a cryptocurrency ETF could help bring tons of institutional money into the market.

The bottom line on the cryptocurrency declines

While there's no specific reason for today's decline, it's fair to say that there are more potential negative catalysts than good ones in the market right now. Until we get some good news, such as the long-awaited approval of a cryptocurrency ETF or renewed interest from the general public, it's tough to imagine any significant, sustained upward momentum in the cryptocurrency markets.

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