The value of bitcoin fell below $7,000 during Wednesday trading, with a number of other major cryptocurrencies recording a drop in value as well.
Data from CoinMarketCap shows that the number one digital currency dropped by as much as $6,825, pushing its market cap down to $115.7 billion. Second-placed ethereum is down by 7.34 percent, at $385, a far cry from its more than $1,400 it attained at the beginning of the year. Litecoin, on the other hand, has slumped by 11 percent in the past 24 hours and is currently trading at just over $119.
However, according to Mati Greenspan, senior market analyst at eToro, the price drops are less to do with fears of a global war trade between China and the U.S., and is more likely down to traders trying to assign value to their portfolio assets.
In a phone interview to CNBC, Greenspan explained:
“I think that there is a big connection in the way that people are managing their portfolios and the cryptocurrencies have been increasingly correlated with the stock markets especially in the last few weeks. This (comes) as more and more brokers add bitcoin, the liquidity bridges are being built.”
Fears of a global trade war between the two nations comes at a time when China has reportedly revealed new tariffs against 106 U.S. products. As a result, it’s thought that this has brought on fears of a trade war.
According to Charles Hayter, chief executive of CryptoCompare, due to the fact that crypto assets such as bitcoin aren’t backed by the traditional banking system, investors are turning to safer investments, adding:
“In the grand scheme of things, cryptos lie on (the) extremely risky end of the spectrum and are for times of hot money. The hint of a trade war puts a bit of fear into the mix and as we all know markets correlate in various periods depending on the exogenous factors.”
News of prices slumping comes amid news that bitcoin has experienced the worst first three months of the year, dropping as much as 48 percent since the beginning of the year. It remains to be seen whether the market can rebound from its current low. However, with pressure to regulate the market, among other factors impacting industry prices, it doesn’t seem like it will be an easy climb back up to previous highs.