Bitcoin carnage: What caused today’s massive price drop?
Bitcoin's comfortable perch above the $10,000 range was gone in 60 seconds.
If you like scary roller-coasters, you're going to love what Bitcoin did today.
Bitcoin plunged $500 in one hot minute, did another $300 in the next 20 minutes and then rode out the rest of the hour making its way to under $9,500.
Good explanations for the drop
Technical analysts agree that this is not good for Bitcoin prices.
"Generally you'll want the prices to be going up instead of down," one expert said to uniform sounds of agreement.
But a clear explanation for the drop was more evasive.
It could be that Wells Fargo just confirmed that it would be preventing customers from purchasing cryptocurrency. For anyone of the opinion Wells Fargo consistently acts in its customers' best interests, this may have served as a red flag saying it's best to avoid cryptocurrency.
It could also have been the savaging the US president recently gave Bitcoin and Libra via Twitter or the doubts Treasury Secretary Steven Mnuchin expressed about Bitcoin yesterday. Alternatively, it may have been the recent Tether mishap, which saw $5 billion of tokens accidentally printed in/out of thin air, thereby highlighting a longstanding concern that Bitcoin's price is indeed based on thin air.
The most likely culprit might be the general withdrawal of enthusiasm around Libra in recent days. It's been the talk of the digital town since its reveal, but recent days and hours have made it clear that it has a long, uphill road ahead of it before release. If the markets were previously pricing Libra-related enthusiasm into Bitcoin, it's possible that now it's simply unpriced it.
There's also the possibility that it's just straight-forward trading going-ons, and that this is one of those times the bears maul the bulls.
Given the strong historical support at $10,000, it's reasonable to expect a lot of people to have leveraged long positions at that point. So, if you get enough selling pressure through $10,000, you're going to get some fireworks.
Indeed, a lot of people blew their margins in extravagant ways at this $10,000 slip, which is likely to have contributed to some of that sheer price drop.
This kind of sudden drop then spooks the herd and drives more selling in the aftermath.
Bad explanations for the drop
It's also worth noting that Bitcoin's market dominance hit 66.6% right before the big drop. This is significant for two reasons:
- It raises the possibility of manipulation by some kind of satanic Bitcoin gremlins.
- It slightly exceeds the peaks of Bitcoin's market dominance it achieved in the bubbly mania of late 2017.
The second point suggests that there's almost some kind of invisible trend balancing out the Bitcoin to altcoin market share ratio. Pullbacks earlier in this month have actually seen Bitcoin's dominance broadly rise. In other words, the price drops after Bitcoin hit $14,000 have been hitting altcoins harder than Bitcoin.
But today is slightly different, suggesting that whatever's going on is a little more specific to Bitcoin than cryptocurrencies in general.
Or maybe it's just a coincidence – or satanic Bitcoin gremlins.
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Disclosure: The author holds BNB and BTC at the time of writing.
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