Once the gnashing of teeth and wailing from Bitcoin traders died down, on Wednesday morning, Asian markets were the first to come to terms with the huge and sudden drop in the crypto markets late yesterday evening, as Bitcoin crashed by over 20% at around 7:45 pm UTC (CoinDesk) to a low of USD 7,944.
A bounce back up ensured a quick recovery, and traders in Beijing and Tokyo ensured that Bitcoin would shed little more. Europe caused a small drop from the recovery, but ahead of North American markets, Bitcoin is now a steady USD 8,335.
— PaperWalletChecker (@WalletPaper) September 25, 2019
Altcoins bled even more during this crash, with Ethereum losing a quarter of its value almost immediately, before recovering to its current levels at USD 166. Few other altcoins did better, with Bitcoin forks BSV and BCH still trading down over 25% from yesterday. Only XEM managed to prevent double-digit losses in the Top 20 (-9.3%).
If yesterday, we were still talking about how many were saying that record lows in Bitcoin volatility were a sign of consolidation, then the technical analysts will be happy to remind us about their predictions. For weeks, they have been telling us that this crash was inevitable and for the short and medium terms, they do appear to be correct.
In fact, one only needs to look back as recently as October 2018, where Bitcoin volatility was at a low point, and price had been stagnating for weeks, before suddenly crashing to the yearly low near USD 3,000. Could the same be happening today?
Whatever the outcome, perhaps it really is simple mathematics that is pushing down price right now, a natural retracing from the heights of 2019, and little to do with public market sentiment.
Nevertheless, the magnitude of the crash caught a lot of people off-guard, even for those who had been expecting a slide. Yesterday’s crash was the third biggest daily loss in 2019, and was probably compounded by the long squeeze preceding it, when investors sold their long positions to try not get caught out by the falling market. Whether it was a coincidence that it all happened together, this downward pressure on prices does seem to be far from over.
If memories are fresh, the two daily losses bigger than that happened in June and July, so it wasn’t that long ago! But if you’re a long term person watching year on year gains, you will also see that Bitcoin is still up over 120%! And almost 200% from the low of the year!
Those still looking for something to blame should look away from Bakkt’s relative failure on launching day, because while it did not reach expectations, it wasn’t in any way bad news.
In the aftermath of the crash, some news outlets reported on a mystery flash crash in Bitcoin hash rate securing the network, with the likes of CoinTelegraph even saying that up to 40% of hash power was wiped out in a moment.
Most technical programmers were quick to point out the flaws of that possibility, given that that sort of percentage would require at least 4 of the biggest mining companies to coordinate a time to simultaneously switch off their rigs.
One commentator outlines how difficult it is to actually measure hash rate by saying:
“I suppose if you measure the inferred hash rate (because it can’t be measured directly) 1 nano-second before a new block drops, after a really long wait for that new block, you could calculate a 40% drop.
But there’s no point in using such an erratic measurement (the average change over 1 unusually long block interval), unless you’re going to make a news story out of it to try to manipulate the market, of course.”
Whatever really happened, it’s clear that some traders panicked, but everyone should remember that overall hash rate trend is up, up and up. As Max Keiser said last month, hash rate is on a 9-year bull run, and bitcoin has been following hash rate for a long time.
— Max Keiser, tweet poet. (@maxkeiser) August 8, 2018
If you like to see the silver lining, Bitcoin price is not at a good bargain. Today, for example, the UK government’s police force is organizing its first ever auction for cryptocurrency seized from criminal investigations. The auction, managed by Wilson Auctions, is now ongoing and putting up some USD 600,000 worth of Bitcoin, Ether and other cryptocurrencies up for online public bidding.
With the 20% drop in Bitcoin price and more for altcoins, there will be fewer better chances than this to own your own Bitcoin for a deep discount!
Image Courtesy: Pixabay