The Bitcoin and the entire cryptomonnaies market experienced in recent days their biggest drop since 2013. The Bitcoin is well down on Monday night to about $ 6,000, after reaching $ 20,000 in early January. It had stabilized Friday around $ 8,500, but the rebound was still to be confirmed.
The whole market had reached its lowest level since the beginning of December, plunging below the $ 300 billion mark when it had exceeded $ 800 billion at the beginning of the year.
Here are the five major reasons that explain this crash:
An expected correction
Many investors had predicted such a fall. The exuberance shown by the market between November and early January seemed exaggerated, with Bitcoin rising from less than $ 10,000 to 20,000 in just a few days. The passage of the symbolic bar of $ 10,000 had indeed generated an unprecedented media interest, and many new investors had entered the market.
The curve was then reversed when another symbolic bar, the $ 20,000 bar, was reached. Market experts are familiar with this phenomenon, known as the correction. Some even think that it is healthy, and that it will allow the market to evolve in a more mature and progressive way.
The fear of regulations
In recent weeks, disturbing news for investors has multiplied. Successive rumors have reported a ban on cryptocurrencies in China, then in South Korea, and finally in India. In these three cases, it was actually a desire of governments to legislate to better regulate this new market, for example by prohibiting investment by remaining anonymous.
On January 11, the Reuters news agency reported that the South Korean government wanted to ban cryptocurrencies, causing prices to collapse by almost 12 percent in the day. The agency was based on statements by the Minister of Justice, denied by the Minister of Finance in the following hours. The latter confirmed on January 31 that the government did not intend to ban cryptocurrency.
In a country where nearly a third of the adult population has invested in Bitcoin and cryptocurrencies, the announcement of the Minister of Justice sparked an uproar, a petition demanding his resignation circulated in the following days, bringing together more than 60,000 signatures.
A pirated Japanese platform
On January 29, Coincheck cryptocurrency exchange platform, the second largest in Japan, the leading country in encrypted currency, was hacked. Nearly $ 530 million of the NEM cryptocurrency was stolen, and 260,000 investors were cheated.
Coincheck has since announced that they will be reimbursed. A way for Coincheck to recognize its responsibility, the company being accused of not having respected the security measures necessary to protect the assets of its customers in this cryptocurrency.
The company NEM has also stressed, lamenting that owners of its currency could be penalized.
Fears around the Bitfinex trading platform
To all this negative news was added this week the announcement that the US authorities had summoned the leaders of Bitfinex, one of the largest cryptocurrency trading platforms on the planet, which accounts for nearly 7% the total volume of trade. At issue, the Tether cryptocurrency, which depends on the platform, and whose price is backed by the dollar. Justice wants to check that the company holds as many dollars in traditional currency as Tether, in order to guarantee its course. This, while nearly 450 million Tether were created in just one week.
The fear of seeing Bitfinex crumble has caused panic among many investors, who remember the crash that followed the bankruptcy of the MtGox platform in 2014, following the "theft" of 750,000 Bitcoin. It took nearly three years for Bitcoin to return to its previous level. But MtGOx accounted for nearly 80% of the currency transactions, which explained that it had such an impact.
A case to follow, then, but the fact that the audit began on December 6, even if the news came out only this week, could seem reassuring for investors.
Wall Street would have bet down
Another common theory explaining the fall of Bitcoin and cryptocurrencies is the market presence of Wall Street investors, who for some of them may have bet on the downside. In English it is called "short selling", translated in French by "vente à découvert". Specifically, the investor is betting on a resale price down from the current price. If this price is reached, he pockets the difference. Thus, by betting on a Bitcoin at $ 7,500 when it was $ 20,000, an investor was able to pocket 75% of profits on his starting bet.
It remains to be seen if the rebound is confirmed in the days to come, as many analysts believe. In the meantime, putting the Bitcoin course into perspective in recent months puts this crash in perspective.
