As prices of popular virtual currencies plunge, more than $0.5 trillion in value has disappeared in less than a month. At the beginning of last month the entire virtual currency market reached a record high of more than $800 billion per coinmarketcap.com. But earlier this week this had fallen to under $300 billion.
During this period digital coins have taken a beating. For instance Bitcoin (BTC) was trading at below $6,000 briefly, the lowest level the digital coin has ever been since last year in November. In December last year the virtual currency reached $19,783.21, a record high, according to CoinDesk. Since then the market capitalization of Bitcoin has plunged below $233.5 billion.
Other digital coins such as Ethereum (ETH) and Ripple (XRP) have also lost value since their record highs earlier in the year. Ethereum has for instance lost around 60% of its value in a span of weeks while Ripple has lost over 80% of its value. However both virtual currencies are at levels that are higher compared to where they were one year ago.
The fall in the value of cryptocurrencies has been attributed to among others a crackdown by regulators as well as the decision by some banks to prevent buying of the digital currencies using their credit cards especially in the United Kingdom and the United States. Additionally Facebook Inc (NASDAQ:FB) has in the recent past banned bans related to virtual currencies and initial coin offerings following criticism from users who were not happy with hoaxes and scams appearing in their newsfeeds.
Some of the banks that are cracking the whip with regards to purchasing cryptocurrencies using credit cards include Bank of America Corp (NYSE:BAC) and JPMorgan Chase & Co. (NYSE:JPM) in the United States. In the United Kingdom Lloyds Banking Group has also slapped a ban on similar transactions being conducted using its credit cards. It is understood that the financial institutions are doing this to avoid being left in debt should the value of the virtual currency deflate significantly.
“You’ve got people that are eschewing their mortgage to buy bitcoin to get rich quick. [The banks are] worried that people are over leveraging themselves and they won’t be able to pay back the debt,” an analyst at Aite Group, Kristina Yee, said.