The cause for the sudden slump is not clear, though it appears that the market’s incredible bull run, pushing through over $2,000 in valuation in just a week, made room for profit takers at the peak. As the price rose to dizzying heights, some found an opportunity to sell positions that they had purchased at much lower prices.
Bitcoin had, by all accounts, a remarkably volatile week, losing $3 bln in market cap in just 90 minutes as the price slid from $11,400 to close to $9,000.
Nevertheless, within 24 hours, the cryptocurrency has rebounded to over $10,500.
Causes down and up
The upside, though, as the currency pushed back over $10,000, had a clear cause. The release of the futures decision by the US Commodity Futures Trading Commission (CFTC) which announced Friday that CME Group and CBOE had met the requirements for regulated trading, led to raucous calls for massive gains in the cryptocurrency and pushed the price back toward the highs near $11,000.
While the bulls are back with the major news, it still remains unclear whether Bitcoin will be able to hold on and consolidate the gains above $10,000, and then press on for more. Some (notably billionaire Carl Icahn) have recently called Bitcoin a bubble, decrying any possibility for further gains. Others, though, are not as sure.
Bounces expected
For example, Alex Mashinsky, founder of the Celsius Foundation makes a strong case that the sell point could possibly have been a coordinated sell around $11,000, potentially to buy in at lows. He says:
“There seems to have been a coordinated sell around 11,000. Many of the Telegram chat rooms were talking about that as a level to sell. It bounced back because there is too much money coming into the large players like Coinbase, so there is consistent buying pressure which overrides any selling. Also many of the crypto funds use these swings to scoop low-cost BTC from sellers who put limit sell orders as downside protection. There are now over 300 crypto funds which registered with the SEC. Four of them are over $500 mln so they are big enough to control the pricing at any moment.”
However, other industry insiders are convinced that the price movement should be expected to continue northward, particularly with all the current news being opened. As greater levels of finance enter the market, more buyers will drive prices further. Alexandre Tabbakh, CEO of PUBLIQ said:
“Mainstream adoption, institutional flow with the creation of futures and derivatives from the CME and other hedge funds, more statement and regulation from governments and regulators, acceptance of Bitcoin payments from significant corporations (PwC…), the ICO flow is constant and maintains an upward momentum.”
Tech related?
Beyond simply the issues relating to market frenzies, others see problems with exchanges as a potential source, both of the downward and upward pressure. It’s no secret that Coinbase has suffered some technical issues, even restricting transactions because of server overload.
This sort of concern could clearly drive markets into a short-term selling panic, only to be reversed when the tech problems were corrected. According to Amos Meiri, co-founder and CEO, Colu:
“The Bitcoin price is influenced by the Nasdaq listing, news and big worldwide exchanges eyeing the opportunity for Bitcoin futures. Adding to that we are usually seeing such a bounce in price when we have many people who want to buy, but couldn’t deposit as exchanges closed their gates, while others who wanted to sell are having issues due to the banking system and challenges around tax regulations.”
Regardless, by and large, the news of the day is positive for Bitcoiners, as another massive drop has been followed by a rebound. If the pundits are right, this price should hold stable and may increase.