Why did Bitcoin crash? This is the question on the lips of most investors as the coin dropped to 13-month low effectively shedding $800 billion.
“Last night, I checked the Bitcoin chart to make trade decisions. The figures didn’t look too enticing so I put off the decision until the next day with the hope things shape up better by morning”
said Monsieur Pineot, a Paris-based trader.
“Switching the computer on Tuesday showed that the Bitcoin market situation had not improved, rather it was getting worse with the coin trading below $4,500”
Surprising Turn of Events As This Year Trends in Opposite Direction to Last
Now, this is surprising, mainly because was no indications showing possibility of a massive drop in the value of Bitcoin.
On the contrary, most of the predictions had pointed in the bullish direction priming the coin community to expectancy that the market would see some real activity after months of relative calm.
The recent Bitcoin losses have agitated many investors and it is not likely that the situation will abate in the coming days.
Tricia Collier of Tampa Bay invested most of her retirement benefits in Bitcoin on the advice of her cousin.
She had hoped that the $22,000 in Bitcoin would be worth something quite substantial in a few years but with the recent drop in Bitcoin value, she despairs that she may lose everything if the market condition doesn’t improve.
Her $22,000 horde of bitcoin is currently worth just $3000 with the most recent sheding of coin value.
Buying On The Crest
Collier is just one of many investors that bought Bitcoin when its value peaked in December with the expectation that the bull market will be sustained.
There have been speculations on the reason for the recent drop in the coin market even though there is none has been proven a strong enough fundamental factor to warrant such rapid bleeding in the coin value.
Bitcoin Cash Tumultous Fork
The trend which coincided with Bitcoin Cash fork has seen some analysts blame the controversial fork for the downward movement of prices.
Craig Wright is one of the leaders of the opposing network, Bitcoin SV. The reason accusing fingers are pointing at him is that prior to the tumultuous fork, Wright had threatened miners he would sell his bitcoins to support the SV if they backed BCH ABC against his Bitcoin Cash Satoshi Vision.
Although there is no evidence yet that Wright is selling his BTC, there neither is evidence that the threat was enough impetus for the price of Bitcoin to fall.
Threat to Push Bitcoin Price Down to $1000
Nevertheless, Wright had maintained his threat through several tweets in which he insinuated that if carried out would see the price of Bitcoin fall to $1000. This is approximately the value of Bitcoin at the beginning of January 2017.
“To all BTC miners…
If you switch to mine BCH, we may need to fund this with BTC, if we do, we sell for USD and, well… we think BTC market has no room… it tanks. Think about it. We will sell A Lot! Consider that….And, have a nice day (BTC to 1000 does not phase me)”
In another tweet, Wright made it clear that Jihan Wu of Bitmain and Roger Ver of Bitcoin.com would sell theirs as well to defend their hashpower and dominance.
BCH Hashpower War
The so-called hash war of the Bitcoin Cash factions calls to question the principle of decentralization. The fact that a few whales are hodling so much bitcoins that they can crash the price of Bitcoin was clearly not the intention of the Bitcoin inventor Nakamoto Satoshi.
This situation has stirred intense discussions in the coin community and may actually be a factor in the recent fall in the price of Bitcoin.
Nevertheless, some enthusiasts see silver linings in the Bitcoin Cash hash war. Darth Maul responded on Twitter that the main beneficiaries of the war would be Wall Street investors who have mostly been on the sideline studying the coin market.
It is clear that if Bitcoin crashes to values as low as $1000, these class of investors will become the whales. Then the coin market will cease to be a peripheral speculative instrument.
“In that small war of yours White Shoe Boys from Wall Street will benefit big time. But that is OK. Time to get rid of character’s like you, Jihan and Roger. And that will play out now. Btw, thank you for chance to buy cheap $BTC and some #Alts. Waiting for war to escalate!”
Really, why did Bitcoin crash? I do not suppose the altercation between BCH ABC and BCH SV is responsible, especially since there is no evidence that Wright, Ver or Wu has sold his coins recently.
SEC Compliance Enforcement? Not The First Time
Some are even pointing at the recent move at SEC against some non compliant ICOs. This is not the first time the regulator is moving to enforce compliance laws, so this should not be the catalyst for the plunge.
What is obvious however is that for some reasons, sell-offs are higher that purchases for the Bitcoin so the supply is higher than demand.
This situation has been accentuated by panic selling by investors which always happens in any market.
Early Investor Sell-off?
Michael Moro, the CEO of a major over-the-counter (OTC) crypto trading firm confirmed the sell-offs saying that his firm is beginning to see people who bought Bitcoin when it was valued $1000 selling.
These probable are cutting their losses in case the bear market persists.
For people like Collier however, it is far too late to sell, the intriguing aspect of the Bitcoin cycle is that whenever it bottoms, the subsequent direction will be upwards.
London-based cryptocurrency broker GlobalBlock made a recent blog post indicating that despite shedding $800 billion this year, the cycle for Bitcoin may soon swing to positive.
“However, many already in the space are still looking to [hold onto their assets] and feel that an upswing will be imminent and that sellers will exhaust themselves.”
Bitcoin’s biggest crash was the 80 percent loss in 2014. With the recent happenings, the coin will equal that record if it falls below $4000.
There are investors on both sides of the divide – people like Collier who may watch the value of their investment plummet and others who are waiting by the sideline to ascertain when the coin has finally bottomed to join the next upward ride.
Bitcoin Swings in Cycles
TheCodeBear, in a Bitcointalk contribution captured the mood of the latter group of investors when he said,
“I think we could see one final panic sell this week to under $4k. I would love nothing more than for the price to stay under $5k for a couple months until I get a bunch of money and join the smart money buying in at these prices. Buy now, sell in the next 3 years on the next boom, could make 20-30x on your investment I bet!”
Continuing, he said,
“My coworker is funny, he is making fun of Bitcoin and Winklevosses right now for their Bitcoin investment, telling me I must wish I didn’t put all that money in bitcoin, I just laughed at him, looking forward to buying in a ton more in the near future!”
Talk of different strokes for different folks.
No one has proven they know what is responsible for this red market. Why did Bitcoin crash? Do let me know in the comment box if you have an inkling.