The price of Bitcoin took yet another nosedive today, falling from about $10,600 to $10,245 in under an hour, a drop of 3%, per data from metrics site CoinMarketCap. Seems minor, but it’s the third major crash this week. Why?
Bitcoin peaked on Tuesday at $12,067. But then it started falling. On Wednesday was the first major ka-doosh, when it fell from $11,726 to $11,395 in about two hours. Then kerplunk on Thursday, when it fell from $11,259 to $10,849 in about an hour. Its latest defeat, er, krrrr-sploosh, occurred today. It’s since recovered a little, to $10,463.
So why has Bitcoin crashed during one of the busiest weeks for crypto ever? Bitcoin works in mysterious ways, but the experts handed Decrypt some likely options.
Simon Peters, a market analyst at crypto trading site eToro, suggested a “number of potential causes.”
One likely culprit, he said, is a “dump from miners.” Said Peters: “On-chain analytics platforms reported that mining pools have recently been moving higher than usual volumes of Bitcoin onto exchanges.”
Charles Bovaird, a researcher at crypto economic research firm Quantum Economics, concurred: “one factor may simply be miners selling their crypto,” he told Decrypt.
Miners are moving unusually large amounts of #BTC since yesterday. #Poolin, #Slush, #HaoBTC have taken the bitcoins out of the mining wallets and sent some to the exchange.https://t.co/NcLmXvZmOD pic.twitter.com/N3E3mX4QKn
— CryptoQuant (@cryptoquant_com) September 3, 2020
Philip Gradwell, Chainalysis’s chief economist, used the blockchain investigation firm’s technology to discover that Bitcoin had been pouring into exchanges in record levels this week.
“Bitcoin inflows to exchanges were 92k yesterday, highest in 37 days, as people rushed to sell at near $12k prices of 1 September,” he tweeted.
#Bitcoin inflows to exchanges were 92k yesterday, highest in 37 days, as people rushed to sell at near $12k prices of 1 September. That sell pressure has likely not been fully worked through yet. Data from here: https://t.co/pOtdWVHfeP pic.twitter.com/8jxaS2lZsW
— Philip Gradwell (@philip_gradwell) September 3, 2020
If lots of people dump Bitcoin on the market en masse—something that often happens when prices skyrocket since traders want to cash out for a profit—then it’s likely that the price of Bitcoin will come tumbling down, often even faster than it went up in the first place.
Next up, postulated Peters, is “the raid/seizure on Bithumb.” Bithumb, South Korea’s largest cryptocurrency exchange, was raided by police yesterday. The raid, according to Seoul Newspaper is linked to the $25 million token sale for Blockchain Exchange Alliance (BXA) token,
Another reason could be this week’s stock market wobble. The US stock market, which this summer rebounded after the COVID-19 crash, fell. Over the previous two days, the Nasdaq has dropped by over 7%, and the Dow by 2.2%
Bitcoin is often considered as a safe-haven asset—meaning that it is uncorrelated with the stock markets—but it crashed along with stock markets in March, and the same could be true this week.
But it’s not fallen below $10,000, the mythical price point above which the cryptosphere considers Bitcoin to be strong and stable. “I believe there is strong support around the $10,000 level,” said Bovaird.
“We have seen $10k tested twice in the last 24 hours,” said Peters, adding, “Seems to be holding for now.”
“It may present an opportunity for bulls that were sitting on the sideline to now get involved.”
For holders’ sakes, let’s hope they don’t have weak hands.
— Dave Portnoy (@stoolpresidente) September 2, 2020