What caused the Bitcoin market to collapse?

In the letter

  • Bitcoin was on the verge of breaking its all-time high yesterday, but instead the price collapsed overnight.
  • Industry experts have given several reasons for this, including the overbought of Bitcoin in recent months.
  • The reopening of withdrawals on OKEx may also have played a role in the fall in Bitcoin prices.

The Bitcoin market collapsed overnight, with the price of Bitcoin falling 11% in the past 24 hours.

In recent months, the Bitcoin market has seen a strong uptrend. Bitcoin’s price jumped from $ 12,900 on October 24, 2020 to over $ 19,000 a month later, making people think that a new all-time high was imminent. But now the numbers are heading in the wrong direction.

“Today’s drop appears to be a temporary correction from the $ 20,000 price point and was likely caused by the fear, uncertainty and doubt created by today’s news,” Igor Runets, founder and CEO of BitRiver, a company that provides solutions for large-scale mining, said Decrypt.

Fear, uncertainty and doubt have been cited as the causes of the stock market crash elsewhere, primarily due to the psychological barrier of $ 20,000.

“The all-time high is a major psychological barrier – breaking it takes real momentum,” Jason Deane, Bitcoin analyst at Quantum economy, which provides cryptocurrency and economic analysis, said Decrypt. Deane added that “the rejection was seen as a sell signal by traders looking to make a profit, leading to a drop in the price and the reverse of the effect we just saw until he equalizes and he starts over. ”

Another reason for Bitcoin’s price drop could be that Bitcoin was chronically overbought. In other words, buyers were getting greedy. “This is generally classified as an overbought signal, which often precedes a correction,” Deane added.

While fear and overbought played a role in the fall in Bitcoin prices, OKEx – one of the world’s largest crypto exchanges – might have played a role as well.

“Given the timing, the decline is likely to have been accelerated by the resumption of OKEx withdrawals,” Sui Chung, CEO of the cryptocurrency index provider CF benchmarks, Told Decrypt.

In October, OKEx suspended all withdrawals after the exchange’s founder taken away by the police. Today, withdrawals resumed, following reports that Mingxing Xu was released. Interestingly, the price of Bitcoin rose when OKEx withdrawals were suspended and collapsed shortly after OKEx resumed normal operations.

OKEx withdrawals may have played a role in Bitcoin’s recent price drop. Image: Shutterstock

“Most of the frozen Bitcoins had traded around 70%, so there was a lot of unrealized profit stuck there,” Chung said, adding that “once these coins were free to move, it is likely that many traders will sell them for dollars and stablecoins. to make these gains, adding more momentum of the sale. ”

Despite the plethora of reasons for the price drop, Bitcoin may well experience a temporary drop.

Bitcoin analysts still optimistic

The price of Bitcoin may have fallen significantly over the past day, but industry experts are hopeful that the price will rise again.

“With a little more time to consolidate, Bitcoin’s exchange rate will go much higher,” Runets added.

Additionally, some Bitcoin watchers suspect that this price drop will not reflect the market crash seen in 2017, arguing that Bitcoin is in a better place now than it was three years ago.

“While the record Bitcoin price hit in 2017 was not broken, the total Bitcoin market cap is much higher because there is much more Bitcoin in circulation than ever before.” Gunnar Jaerv, COO of First Digital Trust, a Hong Kong-based digital asset custody provider, said.

Further, Deane hinted that if “the bottom could be as low as $ 14,000 to $ 15,000, I don’t think it would go down at this point.”

However, other players in the sector believe that this fall in prices is only natural. “I think this sale is healthy for the market which has been overheated and very bullish for quite some time,” said Soravis Srinawakoon, CEO and co-founder of cross-chain data platform oracle Band Protocol, adding that “as we saw in 2017, nothing can go back in a straight line.”

Bitcoin certainly isn’t.

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