5 Reasons Why Bitcoin Flash Crashes to Below $7,300
- Red alert: Bitcoin has lost more than 10% of its value.
The leading cryptocurrency started the day above $8,000 only to fall to $7,293, the lowest level seen on Bitstamp today, a level last seen in May.
Buy the fucking dip
— Majin (@majinsayan) October 23, 2019
However, soon after the price surged back.
At the time of writing, BTC/USD has been trading at $7,491, as per Coincodex. The trading volume meanwhile has shot up as well, going from below $200 million last week to $595 million on top ten exchanges with real volume.
Altcoins are not far behind, they are actually doing what they do best. Imitate BTC with an added percentage.
Congress Members Blasting Cryptos
Bitcoin nosedived as Congress members talked about the downsides of cryptocurrency, during the hearing with Facebook’s CEO Mark Zuckerberg before the House Financial Services Committee regarding his crypto project Libra.
“Today’s selloff is a continuation of the themes that have been plaguing crypto for the past few months — increased regulatory scrutiny,” said Jeff Dorman, CEO of Arca. The “lack of positive catalysts” coupled with low trading volumes is what exacerbated this move lower.
Rep. Brad Sherman, D-Calif. said cryptos either make investors lose a lot of money or “displaces the dollar as the sole reserve currency in the world.”
Long Liquidation on BitMEX
There are also reports of more than $250 million liquidations of long positions on crypto derivatives exchange BitMEX. This liquidation might have been triggered by a sudden sell-off of 3600 BTC on Bitstamp.
Huuuge #BTC long liquidation on Bitmex on that huge sell-off just now which is reportedly driven by a massive sale of 3600 BTC on @Bitstamp. Some reports this could have been an algo gone wrong! Every bid from $7800 to $6200 wiped out in less than 15 minutes. pic.twitter.com/jKQj0sFhii
— taiwandan (@taiwandan) May 17, 2019
BitMEX Price Index is derived from three indexes, Bitstamp, Coinbase, and Kraken. A sell order on any of these platforms, this time it might have been originated from Bitstamp, that added to the cascading effect.
A Hedge to Brexit
A potential reason for the sell-off shared by Brain Kelly, CEO of BKCM is that macro hedge funds were buying BTC as a hedge to Brexit which now seems less likely to happen in the near future.
Questions, and the uncertainties associated with them, now shift from design to implementation. https://t.co/5QONblyekO
— Mohamed A. El-Erian (@elerianm) October 17, 2019
As such, those macro hedge funds are now selling their bitcoin resulting in the price crash.
Zuckerberg’s testimony, according to Kelly is a “secondary effect,” adding “Buyers are reluctant to step up before they hear the Q&A.”
Miners’ Panic Selling
This drop in BTC price could be miners’ panic selling, according to Primitive Crypto’s Dovey Wan.
Wan took to Twitter to share that large miners using Bitmain’s popular Antminer S9 may have been what started this panic selling resulting in the drop in BTC price.
The issue with miner activity and breakevens is that bitcoin miners, unlike gold miners, speculate with inventories. Bitcoin miners HODL. This results in gamma, which is negative when hodling decreases while price is going down, amplifying the downside.
— Alex Krüger (@krugermacro) October 23, 2019
Kelly also said that Bitcoin miners who use high powered and expensive computers to mine BTC have a break-even price of between $7,500 and $7,900. Any price below this will cause miners or sell, he said.
Technicals at Play
Last but not the least, technicals have been pointing towards a fall.
The 10% drop in BTC didn’t come as a surprise. Analysts and traders have been expecting a fall from some time now.
If buyers weren't interested in $7800 Bitcoin, they're likely not interested in $7500 prices
It likely goes lower w/ confluence support at $7200 & below
Even after a natural bounce there, it comes down to where large/agressive buyers are interested
Take it level by level
— Josh Rager 📈 (@Josh_Rager) October 23, 2019
As we reported, volatility has been declining since July and it has been expected to come back with a bang and today we saw exactly that. Also, the narrowing difference between the digital asset’s upper and lower band in the Trading Envelope Indicator was suggesting a move like mid-September when the price fell 12%.
Now, what remains to be seen is if we are going to $6k or not.