Investment is up, volume is stable, volatility is low, all the indicators point to a bullish market reversal and then Wham! Bitcoin crashes, again. The crypto market is just as unpredictable as the weather, if not more. Technical analysis of the past weeks depicted a clear upward reversal; a head and shoulder pattern followed by a bull flag. It all coincided with a minor breakout above $4,000 led by Tron’s always enthusiastic announcements and signs of crypto-friendly regulation. But just as it did on November 12, 2018, all the buildup of goodwill and hope was invalidated by a sudden, unexpected, and unexplained drop in prices.
The drop occurred in two phases and it was akin to a lighting in speed and severity. The first drop occurred last night at 2200 hrs UTC, and ended at 2320 hrs UTC; in less than two hours $9 billion of marketcap were wiped out. Then this morning at 0800 hrs UTC, it dropped again, taking a further $5 billion in the process. The change in price was a shock to all involved or following the market who didn’t expect it.
Despite the continual loss of value, developers, investors, and enthusiasts remain bullish about the future of the crypto space. Most predictions anticipated a price reversal as Bitcoin tested and then broke the $4,100 resistance line on January 6th. And then it hovered above it since then. In fact, the price remained above $4,000 for four days, fueling the belief that it would finally move up. All of these feelings changed last night with the change in fortunes and now everyone is laying back in their chair wondering why it happened.
The hardest part of dealing with Cryptocurrencies is trying to explain its volatility. Generally, it is attributed to speculation caused by the news or trading actions. In this case, the media is silent with no glaring occurrences to explain what we are seeing. The data though provides a clue of at least what is actually happening in the market. And that is the drop off itself; the drop indicates that two major sell offs took place. And what remains is to study the aftermath and identify the beneficiaries of the incident.
There are many usual suspects in cases like this; most notably short positions, Future markets expiration, pump-and-dump schemes, price manipulation, etc. What can be ascertained is that this price change occurred under an intended, almost impulsive decision; possibly in anticipation to a bigger change in the market. Of course, there is no way to know for sure why crypto behaves the way it does. All explanations can barely amount to rumors, assumption, and speculation. And that is the annoying part of what happened last night. No once can tell what is going to happen, and whoever says the contrary is lying.