The Bitcoin price crash was caused by market manipulation and panic selling, rather than the Coinrail hack that mainstream media attributed it to.
The price of Bitcoin and other cryptocurrencies have dropped over the past few hours, with Bitcoin now trading above the $6,700 mark. This means that Bitcoin has plunged down by 11% over the past 24 hours. This sudden market crash has got the whole cryptocurrency market talking and the mainstream media and other cryptocurrency news sites are attributing this crash to the Coinrail hack that occurred yesterday.
However, some market experts and traders have claimed that the hack of a minor cryptocurrency exchange isn’t the reason why the market is down, rather the main catalysts are market manipulation and panic selling by most traders.
Panic selling causes market to plunge by $42 billion
Over the past few weeks, the price of Bitcoin has been trading sideways. However, things took a dramatic turn yesterday when it plunged from the $7,600 region to the $7,200 region, going down by 5%, with other major cryptocurrencies also losing by 7% or more during that timeframe.
The plunge in prices resulted in some traders panic selling and this further led to Bitcoin losing another $500 within an hour. It plunged from the $7,200 region to around $6,700 within an hour. This resulted in the cryptocurrency market losing more than $42 billion and total market cap now stands around $295 billion. The market has now lost more than 50% of its value since the start of the year, a statistics that provides the perfect reason why some traders and investors are cashing in on their cryptocurrency reserve.
Most mainstream media and other cryptocurrency focused media have attributed the recent dip in prices to the hack of cryptocurrency exchange Coinrail. This exchange ranks the 88th in the world in terms of 24-hour daily transaction volumes and has reportedly lost just $40 million in the hack.
However, some analysts and traders have moved to quash that suggestion as they believe the exchange is unknown by most even in its native South Korea. According to most of them, panic sellers are the reason why the market slumped over the past few hours.
In an interview with Bloomberg, Stephen Innes, head of Asia Pacific trading at Oanda Corp. in Singapore stated;
This is ‘If it can happen to A, it can happen to B and it can happen to C,’ then people panic because someone is selling. The markets are so thinly traded, primarily by retail accounts that these guys can get really scared out of positions. It actually doesn’t take a lot of money to move the market significantly.
The low liquidity of the cryptocurrency market is still one of the issues that are affecting it. The big players regarded as whales have so much invested in the market that they can manipulate the price of Bitcoin and other cryptocurrencies. If a whale decides to sell just 1,000 BTC, then the whole market will react negatively and this will lead to a wave of panic sell from smaller traders and investors who believe that the market will be moving in a direction that wouldn’t favor them.
Whales aren’t buying
The whales have the power to either drag the price of Bitcoin down or pull it up. The trading volumes still remain low largely because the market lacks buyers at the moment. Whales, by selling just a part of their holdings, can drive the prices down and can easily push it back up by purchasing more coins, something that was evident on April 12 when Bitcoin price went up by $1,000 within an hour.
CFTC looking into market manipulation another cause for slump
A report by the Wall Street Journal on Friday revealed that the U.S. Commodity and Futures Trading Commission (CFTC) has subpoenaed four cryptocurrency exchanges as they look to collect trading data in an ongoing investigation into market manipulation.
According to some traders, this is another reason why the prices of Bitcoin and other cryptocurrencies slumped. The CFTC was reportedly angry at CME after it failed to negotiate with the exchanges to hand over their trading data.
A spokeswoman for the CME stated that;
All participating exchanges are required to share information, including cooperation with inquiries and investigations.
Late last month, the United States Department of Justice (DOJ) alongside the CFTC, opened a criminal probe on illegal trading activities in cryptocurrency markets. The probe has been focused on spoofing, which is a type of market manipulation wherein traders book numerous false orders to deceive other market participants into buying or selling. They are also looking into wash trading, a situation where traders would buy and sell cryptocurrencies with themselves, leading to an increase in market activity and subsequently bring confidence to other investors and lure them into the market.
The market manipulation probe is considered by some traders as one of the main reasons why the Bitcoin price slumped. Is the CFTC unto something? Well, we will have to wait and find out.
Traders getting frustrated by bear market
The bear market, which has been in play since the start of the year, has now gotten some traders very nervous and unhappy. Traders on various platforms have been talking about the bear market over the past few hours, with a lot of them frustrated by the bear cycle which refuses to give way for a Bullish run.
A user on most active cryptocurrency discussion forum, Reddit, in his post titled “I’m Done” wrote that;
24/7 Market – 70% down…. It’s been emotional ladies and Germans but I am officially tapping out. Will leave 5k in this shitshow and see where it goes but the trading…no more, can’t do it. Don’t have the emotional fortitude. God speed sailors.
There are many in the cryptocurrency world who feel this way and while that a user has the strength to leave the remaining funds in cryptocurrencies, others like him are selling their cryptocurrency reserve and causing the market to dip even further.