This is not a drill: Cryptocurrencies are crashing

With the major selloff in cryptocurrencies Tuesday, it’s time to call it what it is: a crash.

Although prices are still generally higher than where they were only a couple of months ago, five of the six largest cryptocurrencies are down by 40 percent or more from their all-time highs, including the market leader, Bitcoin. Ethereum is off by 24 percent. Tuesday’s declines were attributed to a drop in volume from South Korea and Japan as an internal memo at China’s central bank calling for further crackdowns on cryptocurrencies was reported by Reuters.

 Prices via Bitstamp except for Cardano, which is via CoinMarketCap

While definitions vary, a market correction is commonly defined as a drop of between 10 and 20 percent from recent highs. A bear market usually refers to a fall of more than 20 percent while a full-on crash is often thought of as a quick collapse of 40 percent or more over the course of a month.

Using that definition, five out of six cryptocurrencies have crashed while Ethereum is in a bear market. The combined market cap of these six currencies is $418.8 billion, or 73 percent of the entire cryptocurrency market, according to data from CoinMarketCap.

Cryptocurrency fans are loathed to use the term “crash” but were this any other asset class, a drop of such magnitude by the lion’s share of the market would be described exactly as such and would lead to worry and panic. Yet such significant moves are considered a feature, not a bug to its proponents.

The question is how long will it be until such moves scare away the newest crop of investors who took these currencies to their record highs in the first place.