And you thought volatility in crypto prices was a thing of the past. In the space of a couple of hours, crypto markets shed $30 billion of their overall value in less than two hours.
Bitcoin price crashed by more than 9 percent to $8,648.66 in approximately 30 minutes today at 14:35 UTC. But that was not the end of it. The original cryptocurrency continued its free fall, albeit in a slower mode, reaching a nadir of $8,019 at 20.44 UTC.
After that steep 17 percent drop, bitcoin price began a recovery. As of this writing, a single Bitcoin is changing hands at $8,727.52, down 10.42 percent from its price 24 hours ago according to Coindesk’s tracker.
Altcoins, or cryptocurrencies other than bitcoin, also fell in concert as crypto markets sizzled with volatility after a prolonged period of moribund price movement. Ethereum’s Ether and Ripple’s XRP, the world’s second- and third-most valuable cryptocurrencies, fell by 14 percent and 8 percent respectively in three hours.
Other coins in the top ten cryptocurrencies also showed notable declines in their price. As has been the case previously, fearful traders moved their funds to Tether, a stablecoin that trades at parity with select fiat currencies including the US dollar. Tether witnessed a slight increase in its value as other cryptos capsized.
Why Did Bitcoin Price Change Direction?
The latest move for bitcoin price represents a change in direction from previous months. It had resolutely stayed above $10,000 for most of this month and its slide below $9,000 occurred for the first time in three months.
Multiple outlets attributed the crash in prices due to margin calls and contract liquidations at BitMex, a Seychelles-based exchange. The data from various sources seems to bear out this hypothesis.
Jeff Dorman, chief investment officer at Arca, an asset manager, said price action was mostly a result of short-term technical analysis right now. “…every low price that Bitcoin has bounced off of, and every high price that has been reached has proven to be resistance,” he said. “Because crypto is still dominated by short-term focused traders, these telegraphed narratives often become self-fulfilling prophecies.”
The crash also occurred a day after the launch of Bakkt, a futures trading platform and potential venue for shorting bitcoin price. However, Bakkt is off to a slow start: as of this writing, only 216 contracts have been traded on the platform. “It’s far better for Bakkt to start slow, on board customers, and show growth over time than to come out guns blazing and then fall flat 2 months later,” said Dorman.
Meanwhile, other important indicators for bitcoin, which had been flashing green these past few months, are turning red. Hashrate or the amount of computer power deployed to Bitcoin’s network has fallen by 30% in the last couple of days. A fall in hashrates means more time for confirmation of transactions and a less efficient network. Not surprisingly, the transaction volume in Bitcoin’s network has also declined by 20.6% in the last six days. One could theorize that these declines could possibly translate into a sideways or, even, declining price movement for bitcoin price, instead of bouncing back up to previous levels.