Cryptocurrency downturn returns, erasing some recent bouncebacks
The current downturn may show unresolved issues in the cryptosphere, while other signs show a rosier long-term outlook.
18 of the top 20 coins by market cap have seen price drops in the last 24 hours, most in the order of around 5%, according to CoinMarketCap.
It's a mild slump by cryptocurrency standards, but it marks the continuation of more substantial previous downswings, at a time when many people might have been expecting a bounce-back.
As one might expect, USDT Tether is also showing mild gains over the last 24 hours. It might not be the best stablecoin anymore, but it looks like it has been fairly reliably going the opposite direction to the rest of the market in recent weeks.
It may also be at least partially responsible for the current price downswing. On 27 January it confirmed that its relationship with audit firm Friedman LLP had dissolved, but at the same time it's printing off hundreds of millions of dollars worth of Tether which may or may not be backed by actual liquidity.
The close relationship between Tether prices and the rest of the coins is getting clearer, but it keeps slipping from its peg and its volumes keep increasing, which might have left a lot of speculators feeling hesitant.
Tether's daily trading volumes have also been trending gently downwards since 27 January. Its role as a market facilitator (people trade via Tether and get credited in Tether when depositing USD to certain exchanges) might suggest that many people are simply staying away from the crypto market for now. Plus with tax time approaching in the USA and cryptocurrency regulations gradually crystalising around the world, it makes sense that some speculators would be stepping to the sidelines for a breather.
If this is what's actually driving the current market downturn, it might not have the most confidence-inspiring implications for cryptocurrency as a whole. It would suggest that the market as a whole is over-inflated and tends to deflate when trading volume slacks off.
But in the long run, it looks like most speculators are feeling bullish.
Hedge funds are holding more than twice as many long positions as short positions in bitcoin and exchanges are still bursting at the seams with millions of new signups per week. Based on these factors, one might conclude that there's still plenty of optimism and interest in cryptocurrency from both institutions and individuals.