Bitcoin has continued to fall losing more than a fifth of its value in just a few days. The cryptocurrency is trading at its lowest level since October 2017, though analysts are struggling to explain the reason. The price crashed below $US5000 for the first time in 13 months, and it’s all because of the civil war between the crypto’s biggest names. Now it is at $4200 reaching a new yearly low once again for the 2nd time in a week, falling even below $4200 mark to $4170 on fiat to cryptocurrency exchanges like Coinbase and Kraken.
The cryptocurrency has plunged nearly 14% over the past 24 hours to trade at $4843 early, nearly 25% down a week ago. It came amid a broader sell-off that wiped nearly $24 billion off the market capitalization of more than 2000 tokens. BTC hasn’t traded at $5000 since October 12 last year when it briefly passed through the milestone during its meteoric run-up to an all-time high of $20,000. The digital currency has hovered around the $6000 mark for most of 2018 after the entire cryptocurrency market crashed at the start of the year, but many enthusiasts believe it would not drop below $5000 again.
Seeing the poor conditions and intensity of drop of BTC in the last 5 days, investors, even those who bought at $1000 to $2000, are expected to sell a significant chunk of their holdings fearing a further drop below the major support levels. Investors in the 1st quarter of 2017 are still up 50 to 100 percent on their investments. But the cryptocurrency market has not seen a correction of this scale since 2014 when the value of BTC dropped by more than 85%. BTC is yet to achieve an 85% drop from its all-time high at $19500. An 85% drop from $19500 is $2950 and the dominant cryptocurrency would have to drop by more than 32% from $4400 to dip below $3000.
Why did the market crash?
Speculations around why the cryptocurrency market hit with such heavy losses, focussed on the hard fork of BCH that took place, whereby the cryptocurrency effectively split in two to create a brand new cryptocurrency. This move led to uncertainty among the cryptocurrency investors, in a market which already was experiencing reduced interest due to the steady losses happening throughout 2018.
Until the cryptocurrency crash on 14 November, BTC had actually been experiencing one of the most prolonged periods of stability in its history, trading between $6000 and $7000 since early September. This led to rumors stating that the lack of market movement was the “calm before the storm”, though many anticipated the price shift to go in the other direction.
Another reason possibly for the crash may be the SEC’s announcement that the operators of to “Initial Coin Offerings” broke the law by selling unlicensed securities and must pay fines and restitution. This is beginning because crypto bros spent most of 2017 poking the SEC bear and now the bear is awake. This development was enough to spook some crypto investors.
The third possibility is bad news from chip makers Nvidia and Advanced Micro Devices which lately reported steep sales declines for cryptocurrency equipment. The sales declines suggest interest in crypto waned and is unlikely to pick up anytime soon.
Sam Gellman pointed out that crypto has sucked up $30 billion in ICO money in 2 years and hasn’t delivered a user base beyond crypto speculators.
