Bitcoin, along with other major cryptocurrencies ripple (XRP), ethereum, bitcoin cash, stellar, and litecoin, have fallen again over the last 24 hours as investors and traders fret over a flood of warnings on the future of cryptocurrencies.
The bitcoin price has been dropping since a civil war in a fork of bitcoin, bitcoin cash, led to the smaller cryptocurrency splitting again in two last week. The bitcoin cash so-called hard fork, a consequence of the coin’s developers and miners being unable to agree on a direction to take the cryptocurrency, resulted in the creation of bitcoin ABC and bitcoin SV.
The bitcoin cash hard fork was blamed last week for the initial sell-0ff, wiping billions from the value of bitcoin, ripple (XRP), and ethereum, but led to many analysts and groups decrying the chaotic nature of cryptocurrencies and their unsuitability as a currency and a store of value.
The row has resulted in bitcoin and cryptocurrency exchanges making hasty decisions on how to handle the split, with Hong Kong-based OKEx, which claims to handle more than $1 billion of crypto trades daily, changing the terms on $135 million of derivative contracts without warning, leaving several with losses according to Bloomberg, and highlighting the risks of using unregulated virtual currency platforms.
U.S.-based cryptocurrency exchange Kraken meanwhile warned users against potential risks of trading bitcoin SV, writing in a blog post that it “does not meet Kraken’s usual listing requirements” and “should be seen as an extremely high-risk investment.”
After last week’s sell-off the bitcoin price found support at around $5,500 but that has now eroded, with bitcoin falling some 3% over the last 24 hours to under $5,380—its lowest price since October last year, according to CoinDesk’s bitcoin price tracker.
Having traded at almost $20,000 last December, bitcoin fell sharply last week, down some 70% from its peak. The sudden instability was a blow to those who were hoping bitcoin is moving into the mainstream.
Meanwhile, ripple, the common name for the XRP digital token, fell more than 6%, all but erasing its gains over the last few weeks. The ethereum price dropped even further, losing 8% and firming up ripple’s position as the world’s second largest cryptocurrency, with bitcoin still way out in front.
Accounting giant KPMG last week warned bitcoin and other cryptocurrencies not ready to be classified as real currencies and that using bitcoin as a store of value is a “fool’s errand.”
KPMG found that for cryptocurrencies and related assets to prosper they need “institutionalization”—something many expected to happen this year but has so far failed to materialize as the world’s banks and financial institutions wait on the sidelines to see how regulators will move first.
Institutionalization is, according to KPMG, the large-scale participation of fintech companies, banks, payment institutions, exchanges, broker-dealers, and other entities in an industry.
“More participation from the broader financial services ecosystem will help drive trust and scale for the tokenized economy and help the crypto market grow and mature,” said KPMG chief economist Constance Hunter.
“Consider for a moment extending a person or entity a loan in a cryptocurrency,” Hunter added. “The value is too unstable at the moment to be assured repayment. Under these conditions, neither lenders nor borrowers would be willing to take the risk of transacting in cryptocurrencies.”
Adding to bitcoin’s negative sentiment, analysts polled by Bloomberg predicted the bitcoin price could fall to $1,500, a drop of more than 70% from current levels.
“I didn’t sleep well last night,” Travis Kling, founder of the hedge fund Ikigai, told the newswire. “There’s a small chance that, it’s difficult to estimate, that something really bad could happen related to Bitcoin Cash that could then impact the entire crypto market.”
Bloomberg analyst Mike McGlone of bitcoin’s “enduring bear market”, adding: “[The recent pump] a few weeks ago got the market a bit too offsides with speculative longs playing for the good-old days.”
Elsewhere, in a story headlined “Bitcoin’s repeated splits undermine its long-term value“, Financial Times journalist Jemima Kelly, a long time critic of cryptocurrencies, wrote: “Under the laws of supply and demand: something that can be infinitely replicated must lack long-term value. Anyone trying to market such a thing — however many new bells and whistles they put on it — is essentially trying to sell hot air.”