Bitcoin’s price has been on a downward slide since the start of this year. That slide accelerated this past weekend, when the cryptocurrency registered its lowest price since February. Starting Saturday evening, bitcoin saw a steep 12% decline in its price in less than 24 hours. It has continued to fall thereafter. As of this writing, it is trading at $6414.79, down 17% from a week ago.
Why Did Bitcoin’s Price Fall?
Several reasons have been put forward for the fall in bitcoin’s price last weekend. But, as with everything bitcoin, the jury is still out on the actual cause. (See also: Is The Bitcoin Bubble Finally Over?)
Some claim that news of a hack at Coinrail, a small South Korean exchange, spooked investors. “At present, 70% of your Coinrail total coin/token reserves have been confirmed to be safely stored and moved to a cold wallet and are in storage,” the exchange stated. But it did not provide a monetary value for the remaining 30% coins that are suspected to have been stolen.
Others point to a WSJ story published Saturday morning about the CFTC demanding trading data from exchanges to investigate claims of manipulation. The Chicago Mercantile Exchange (CME) uses four exchanges – itBit, Kraken, Coinbase and BitStamp – in order to set prices for its bitcoin futures auctions. But it does not have a data sharing agreement with the exchanges, thereby making it impossible for the Chicago trading venue to ascertain the veracity and volume of trading occurring at the underlying crypto exchanges. (See also: What Happens If The Price Of Bitcoin Crashes).
Regardless of the actual cause, a selling frenzy occurred immediately among traders paring back their losses after bitcoin’s price started declining. Trading volumes are thin on weekends as transactions are dominated mostly by retail investors and not by institutional investors, such as hedge funds, who generally prefer quick transactions that involve trading in fiat currencies. On weekdays, bank transfers are not a problem. However, there are significant delays on weekends.
A CNBC news report states that trading volumes rose by 25% during early afternoon last Saturday EST. The sharp increase turned a slide in bitcoin prices into a steep decline. “That serious uptick in volume around 6 pm BST was when you saw that really violent move downward," Matthew Newton, U.K.-based analyst at eToro, told the publication. "It certainly seems to have accelerated the drop."
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