Bitcoin Price Volatility Returns, Crashes $1,900 in Less Than Three Hours

When bitcoin price cratered in 2018, analysts and commentators opined that its price swings might become a thing of the past with more money flowing into the asset class.

As it turns out, they were wrong.

The entry of institutional investors and technological developments, such as the Lightning Network, have not done much to dampen volatility in the asset class.

Bitcoin price recorded its steepest decline yesterday, falling by as much as $1,900 in less than three hours. The original cryptocurrency had been riding a crest in its price after Facebook announced its entry into cryptocurrencies and blockchain. As of this writing, it is trading at $11,779.04, down by 8.35% in the last 24 hours, according to Coindesk’s index. That price also represents a fall of 15% from yesterday’s high of $13,844.77.

The original cryptocurrency had been riding a crest in its price after Facebook announced its entry into cryptocurrencies and blockchain. It rose past successive milestones in less than a week as its price skyrocketed by more than 40% during that period. Just yesterday, it soared by more than 22% before the fall.

What Caused the Sudden Price Drop?

Popular opinion points to the role of cryptocurrency exchanges. North America’s biggest cryptocurrency exchange Coinbase went down during Bitcoin’s price crash. Some say that the exchange’s systems could not handle the “heat” of rapid Bitcoin trading among investors.

Millennial focused app Robinhood also stopped trading in Bitcoin during that time while Hong Kong-based Bitfinex, arguably one of the biggest exchanges by volume, was on scheduled maintenance.  

Others say high leverage might have hurt Bitcoin’s prospects. “The presence of leverage exacerbates the moves in both directions and affects the speed dramatically,” said Michael Moro, CEO of Genesis Global Trading, a Chicago-based prop trading and digital custody firm. Meanwhile, shorts, in which traders borrow bitcoin to trade against it, against bitcoin price have risen at the CME Group futures trading facility.

Prominent investors, who’d been hurting from the cryptocurrency’s speculator fall, got in on some of the price action for Bitcoin. Billionaire Mike Novogratz, who has invested a third of his fortune in cryptocurrencies, was among them. Novogratz told CNBC that he sold “a little bit” of Bitcoin during Wednesday’s bull run. “If you were perfect, you’d have sold a whole bunch yesterday,” he said.”When you go parabolic, you have to.”  

Will Bitcoin Rise Again?

The answer to that question is as unpredictable as Bitcoin’s price action. For the most part, the cryptocurrency has defied technical and fundamental analysis. For example, it continued a downward trajectory even in the face of positive developments relating to the entry of institutional investors last year. Still, analysts are hazarded guesses.

Mati Greenspan from eToro says the current rally does not have any technical underpinnings. “The nature of the climb as such as such prevents us really from getting a solid support footing,” he wrote in his daily newsletter, adding that the key psychological support level of $10,000 has not been tested, meaning the crypto has not fallen to that limit repeatedly. “Of course, if we do continue up from here it would be pretty crazy and certainly would be a testament to the fact that we might actually be in for a much larger bull run,” he wrote.