When the bitcoin price fell more than $1,000 and the cryptocurrency market cap shed more than $40 billion on “Bloody Sunday,” many media commentators attributed the decline to a security breach at a small cryptocurrency exchange in South Korea. However, Mati Greenspan, senior market analyst at eToro, says that claim is misguided.
As CCN reported, the little-known Coinrail became the latest cryptocurrency exchange to fall prey to hackers, who are said to have made off with approximately $40 million worth of tokens, a fairly pedestrian figure relative to some of the hacks seen over the years.
Later that day, the bitcoin price began to careen downwards, taking every other major cryptocurrency with it. This led some observers to draw the conclusion that the two events were linked.
Writing in market commentary made available to CCN, Greenspan said that “there is absolutely no reason why this smash and grab job at a local boutique should have sent bitcoin down by $1,000.”
While the bitcoin price did experience a small decline in the immediate aftermath of the report that an exchange had been hacked, Greenspan noted that the bulk of the decline came more than 15 hours later and that the scale of the pullback was entirely disproportionate to both the size of the hack and Coinrail’s significance in the cryptocurrency ecosystem.
He argued that the decline was instead a technical correction, as most of it occurred immediately after the bitcoin price broke beneath its long-term trendline and moved closer to two key support levels.
“Though the CoinRail hack may have set us off-track, I don’t think that this will have very significant ramifications in the long run,” he said. “The industry has certainly seen much bigger hacks before and other than a technical price level, this doesn’t change much for the path of the industry over the next five years.”
Greenspan said that over the long-term, the bitcoin price will likely be carried higher by the advent of institutional investment in the space but that this will not occur until the markets build momentum that translates into an organic upswing.
“For now, the big money will most likely remain on the sidelines and wait for emerging markets to build momentum, as they did in late 2016,” he concluded. “Whether this happens over the course of a year, or within a week, I guess we’ll have to wait and see.”