Cryptocurrencies' extreme volatility rekindles uncertainty of digital rally

Gettyimagesbank

By Anna J. Park

Is this the end of the cryptocurrency rally or is it simply another of the frequent volatile correction periods?

No one seems to know, as the prices of major cryptocurrencies have shown an extreme level of volatility during the past 24 hours, tumbling 30 percent to 40 percent at around 10 p.m. Wednesday, (KST), before moving upward in the following hours.

According to trading records from Coindesk, bitcoin's trading price stood at $39,698.80, a 1.08 percent increase from the day before, as of 2:40 p.m. Thursday (KST). The price went as low as $31,926.37 at 10:14 p.m. the previous day, the lowest price the cryptocurrency has marked this year. Yet the price recovered from its sudden loss in just several hours.

The price of Ethereum hasn't recovered all of its daily loss, as it was traded at $2,644.42, a 10.16 percent loss, as of 2:40 p.m. Korea time. The price plunged to $2,089.32 at around 10 p.m. the previous day, more than a 30 percent drop in a few hours. However, the price of the world's most heavily traded digital coin moved upward again in just half a day.

The two leading global coin assets' prices at major Korean cryptocurrency exchanges, including Upbit, also turned positive again by Thursday afternoon. Bitcoin's price stood at 51.63 million won ($45,573) and Ethereum at 3.44 million won, as of 2:50 p.m. Korea time, both more than two percent increases from the day before.

Despite the seemingly tranquil price movement as of Thursday afternoon, the plunge of some 30 to 40 percent just half a day ago was initiated as China imposed a set of new restrictions on cryptocurrencies on Tuesday. Aiming to increase its level of control over virtual assets, Beijing prohibited banks and financial payment firms from providing cryptocurrency transaction services.

Market divided over prospect of crypto assets

Due to the severe sell-off of cryptocurrency assets following China's announcement, some media outlets reported that the current digital rally, which started early this year, was heading to its demise, as investors turned sour on its extreme volatility. Wall Street Journal reported that the peak of the rally was at U.S.-based cryptocurrency exchange Coinbase's listing at Nasdaq in mid-April, when the bitcoin price reached its all-time high of $63,346.79.

However, the pessimistic view is not shared among all major market participants. Some coin experts remain positive about the long-term future of the digital asset, as well as the rather short-term perspective of its price movement.

ARK Investment CEO Cathie Wood repeated her affirmative stance once again in a Bloomberg TV interview on Tuesday, local time, that bitcoin will reach up to $500,000, saying the coin is now “on sale.” ARK Investment actually purchased about 170,000 shares of Coinbase stocks on Tuesday for its ARK Innovation ETF and ARK Next Generation Internet ETF.

“About 70 percent of short-term coin investors are experiencing losses in their crypto portfolios. Since not so many digital assets are remaining to be sold off with profits, downward pressure of the coins will be limited,” a local crypto-market watcher said.

However the expert particularly warned against the use of leverage at this point in digital asset investments, as market volatility remains very high and could be widened even more amid increasing concerns about the future of cryptocurrencies.

It is said that over 3 billion dollars' worth of coin liquidation took place at worldwide exchanges with the use of leverages. Some customers are strongly protesting against Binance, one of the major global cryptocurrency exchanges, as its transaction network froze, forcing liquidations on many of its users.