Analyzing the Top Contributing Factors for Causing the Harshest Crypto Crash of 2018 (So Far)
These past few weeks have been quite unpleasant for bitcoin investors, especially because the cryptocurrency dipped to a low of $4,200. The good news is that prices seem to be recovering slightly.
However, there are many who are still feeling the impact. The market has lost a total of $70 billion since last Wednesday and BTC’s price decreased by 25%, which is the lowest since about the same time last year. In addition to BTC, other cryptocurrencies have experienced a decline as well. For instance, Ethereum’s value declined to from the $700 it was at a few months ago to $126 this week.
As the market, hopefully, recovers, many are wondering how long the recovery will last. One way to determine such a question is to look at the factors that may have influenced this recent crash and to prevent them from reoccurring.
The Hash War
Many news outlets have pointed to Bitcoin Cash’s Hard Fork as a reason for the decline. The hard fork came after months of conflict and the ultimately development of two blockchains, Bitcoin ABC and Bitcoin SV. Exchanges and mining pools tend to declare their allegiance to the former due to its better quality than Bitcoin SV. Neither side has tried to end the dispute and as a result, it has been termed as a “has war.” Most pools allocate their computation rate to Bitcoin ABC mining so that they stay ahead of SV. Investors then became concerned and decided to sell their crypto holdings, even though the USD was weaker.
The hash war has yet to come to an end. And moreover, it may not even stop impacting the crypto markets.
Another issue that potentially impacted prices is an announcement by the US Justice Department, in which it stated that it has launched an investigation into price manipulation in the crypto markets. It is possible that Bitfinex and Tether may have artificially pumped into the market to raise the price of Bitcoin to $19,000.
The misconduct and the idea that crypto may be a manipulated market may have led to the decline in price as well. Though it seems that the smart decision would be to promote regulation, many are still against it. At the end of the day, even though oversight is certainly a good thing, it can also lead to market troubles, perhaps akin to what occurred these past few weeks.