Bitcoin price and several other major altcoins have dropped dramatically over the last 1 hour, wiping billions from their value. Below are 5 possible reasons the crypto market is crashing.
December 16, 2019, | AtoZ Markets – After weeks of mostly sideways movement, Bitcoin price collapsed this morning. The flagship cryptocurrency’s price tumbled below $7,000, dragging the rest of the crypto market along with it.
While it has baffled commentators, Bitcoin’s latest price movement is further proof that the cryptocurrency is not beholden to predictive indicators used in conventional analysis. Meanwhile, altcoins are doing much worse than the struggling crypto king. The price of Ethereum (ETH) is down by 5%, shedding any gains that were made throughout 2019.
Litecoin (LTC) and EOS (EOS) are down by 9% and 10% respectively. Not a single coin in the top twenty is flashing green at the time of writing.
What then caused this evening’s conflagration? Below are 5 possible reasons why the crypto market is crashing.
5 Possible Reasons for the crypto market dump
In the last hour, practically the entire cryptocurrency market witnessed a sudden crash, wiping more than $8 billion of the total market capitalization of all cryptocurrencies. As it stands, the global market cap currently sits at $195.11 billion, down from over $203 billion this time on Saturday.
1st – Plustoken Ponzi Scheme
This drop comes shortly after a report from Chainalysis, shared by Bloomberg, revealed that the PlusToken Ponzi scheme, which managed to accrue billions worth of Bitcoin and Ethereum and other tokens over the course of a year, has been dumping thousands of coins per month on the open market.
The news about PlusToken may have triggered the scam operators to dump more tokens on the open market to lock in profits before law enforcement catches up to them.
2nd – BTC dropped below $7000
Another likely reason for Bitcoin price drop is that BTC longs went parabolic on the Bitfinex exchange right before this big drop happened. Historically, such a setup precedes big market downturns that occur as a result of long squeezes. At the time of writing, the number of longs continued to surge, reaching an unprecedented amount of 44,079 BTC.
As more of these longs start getting wiped out, Bitcoin price could extend its drop below the $6,900. It remains to be seen whether the $6,600 level will act as titanium support this time around.
3rd – ETH Suddenly Plummeted 3% in Minutes
One tweet also mentioned that prior to Bitcoin’s drop, the second-largest cryptocurrency Ethereum suddenly slumped, falling 3% in literal minutes. There is a high likelihood that BTC is following ETH’s price action, which is a trend that has been seen before in recent cryptocurrency market history. After all, large-cap cryptocurrencies are all closely correlated, except for XRP.
According to the tweet, Ethereum led Bitcoin’s decline by some two minutes.
4th – ETH Was in Descending Triangle
There’s also this simple technical observation from trader CryptoISO, which shows that Ethereum was trading in a clear descending triangle prior to the latest sell-off, again implying that ETH was leading BTC.
5th – Institutional Players Move Their Funds
Most major cryptocurrencies — led by Bitcoin — topped out in June of this year and have been gradually moving lower ever since. At the end of the year, in the absence of any major trigger, fresh money is unlikely to enter the crypto space. Furthermore, most institutional players prefer to move their money into the asset class that is in an uptrend instead of holding on to the losers.
However, things might change in the new year as institutional investors allocate fresh capital to be invested in various asset classes.
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