Bitcoin and cryptocurrency pain train continues, markets drop $13 billion

Posted: 23 November 2018 6:14 pm
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Hopes of a recovery are still just hopes.

After signs of an apparent recovery which might have had some traders breathing a sigh of relief, bitcoin and the rest of the crypto markets have made another pronounced push downwards. Bitcoin is now sitting in the US$4,300 range, the previously quite-untouched XRP has sunk to about the $0.40 range and Ethereum is rolling around at about $130.

The cryptocurrency pain train that's been chugging through the markets over the last few days has also returned to its favourite punching bag – Bitcoin Cash, dropping it about 15% in the last 24 hours, at the time of writing, to $200.

Over the last 7 days BCH has dropped 50% against the USD and 35% against BTC. In the last 24 hours it's down about 2.15% against BTC and 2.23% against ETH.

The newfound BCH SV fork has been feeling even more of a brunt though, and is now trading in the $30 range on most exchanges.

What's the damage?

The cryptocurrency markets have dropped a sound $13 billion in the last day, prompting many observers to say "ow".

It might be an especially sour sign for any miners who were hanging out in the hope of an upswing, and suggests the current outflow of BTC, LTC and other hashing power is set to continue.

But the miners hanging in there aren't necessarily doing prices any favours either, as they might be diving into their stashes to sell hard, in the hopes of pulling in some real money at higher prices, to keep them going until the hoped-for recovery arrives.

It's also prompted new exploration of the price declines, with Jason Murphy at noting the uncanny similarities between bitcoin's recent collapse and what it looks like when a fiat currency's illusion breaks.

"A period of very suspicious stability fell upon cryptocurrency markets in September. In September, October and November, as global markets roared and wept, Bitcoin showed about as much volatility as a rock. Almost every day it was trading between US$6,200 and US$6,600. The flatness was remarkable."

"The stability made Bitcoin boring. Until all of a sudden it wasn't. When that happened, the crash had a very peculiar shape about it that made me sit up and pay attention," Murphy writes. "I felt like I’d seen this before. It looked to me a lot like the collapse of a fixed currency, also known as a peg."

"I certainly suspect Bitcoin was being manipulated during this period. Who was holding Bitcoin up? How? Why did they stop? Did they run out of money? We don’t know."

For most in the crypto world, their fingers might be pointing at Bitfinex and Tether, which have previously been accused of doing exactly that – manipulating prices to keep bitcoin afloat and even rising.

The evidence has been more statistical than conclusive so far and this theory doesn't necessarily point at anyone in particular. The similarities between the collapse of fiat pegs and bitcoin's recent decline is somewhat uncanny – a sharp, immediate plunge, followed by ongoing slumping. That's exactly what happened here.

"Pegs went out of fashion in most of the world," Murphy says, "although plenty of countries held on until their currency collapsed, like Argentina, and Thailand. When there is a peg in place we see stability. But it can be a facade."

In that respect it's quite funny that the pegged cryptocurrencies are doing pretty swell in the current market. In fact, almost all pegged tokens, with the exception of the suspiciously-regarded Tether, are riding above their expected price as people move funds sideways to the "safe" pegged currencies. Because, by this theory, bitcoin's peg has failed.

What bitcoin was pegged to, or why it was pegged to that particular $6,500-odd range all that time, is unclear, assuming the peg and manipulation theory is correct.

Disclosure: At the time of writing the author holds ETH, IOTA, ICX, XLM, BTC

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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