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5 reasons why crypto market collapsed again

23 January 2018   |  in Blockchain   |  in Blockchain   |   860
5 reasons why crypto market collapsed again
By Igor CHEKUNOV
When will we see bitcoin at $20,000 again? Over the month, the cryptocurrency market fell almost twofold. However there had been several factors indicating an imminent correction. Which were the main ones read in the article by Bitnewstoday.

Every time participants of the young cryptocurrency market are particularly sensitive to the major bitcoin corrections. And if the experienced holders of digital money have already learned to remain calm, then beginners usually tend to panic. Together with many mainstream media, often explaining certain events with not very relevant cliches, market newcomers start to spread pessimistic moods, which leads to an even greater decline. The current decline was largely expected. Like in the stock markets, in the world of cryptocurrency, sometimes only one news is enough for most of the assets to enter the "red zone". By the middle of January, several preconditions had been formed at once. The five most important are presented below.

1. Negative news

The beginning of a new round of cryptoscipticism was marked by reports from Asia. China and South Korea are considered the main drivers of sentiment in the market, and any news and even rumors about restrictions entail a correction. The first impact on bitcoin in 2018 was made by the news from Beijing. At first, the Chinese authorities considered the possible limitation of power supply to the miners, and then the government began discussing a new wave of restrictive measures against cryptocurrency. It was about blocking access to online platforms and mobile applications that offer trading services.

One of the most notable corrections last year was also related to Beijing sanctions. In September 2017, the People's Bank of China declared illegal all transactions related to the ICO. At the end of the same month, the oldest Chinese crypto exchange BTCC announced the termination of trading. In just over two weeks, bitcoin fell from a record level of $ 5,000 to $ 3,000.

Returning to the current correction, another negative factor was the statement of the South Korean Minister of Justice on the preparation of a bill that would prohibit crypto trade. And even despite the refutations of the country’s Minister of Finance, which followed several hours later, the rumors were able to influence the global market of crypto-currencies. Moreover, later local officials were even accused of insider trading. Presumably, they sold their cryptocurrency assets shortly before the announcement of severe restrictions on local exchanges.

2. Bitcoin futures

Bitcoin futures trading started last month. The first contracts of the CBOE (Chicago Options Exchange) expired on January 17. The sharp drop began in just a few hours before this date, which could well be the result of manipulation by large players who benefited from the cheap bitcoin just now. If we consider this scenario as the main reason, such a massive sale is connected with the desire to bring down the price of the first cryptocurrency to make profit from the expiring contracts. It should be noted that on January 26, the first bitcoin-futures will be settled at CME.

3. Chinese New Year

Corrections like the one that happened last week could be observed every January for the last four years. A sharp drop in the price of bitcoin occurs about three weeks before the Chinese New Year. It is quite logical to assume that, in anticipation of the holiday, many Asian traders withdraw their cryptocurrency profits in fiat, to spend them on gifts for relatives and have a good holiday.

Source: Bitsonline

A similar situation could be observed before the Catholic Christmas. After an impressive rally to $20,000 in mid-December, in less than a week bitcoin fell in price by almost a third. All this were clear signs of fixing profits by Western traders. At the same time, Asian crypto investors who followed the trend also withdrew their digital revenues in fiat.

4. It’s OK for crypto market

The levels, which are now considered the bottom, were recently viewed as unreachable heights, at least in the short term. At the beginning of last autumn many experts predicted that the mark of $10,000 would be reached only in 2020. This milestone was passed at the end of November, after which, in two weeks, bitcoin, just like the total capitalization of all the cryptocurrencies, almost doubled. With this exponential growth, correction was inevitable, even despite the unpredictability of this market. In 2017 bitcoin experienced several large kickbacks. In May, after cryptocurrencies drew attention of mass media around the world, the price of "digital gold" fell from a record $2,700 to $1,860.

In mid-June, after touching $3000 on some exchanges, BTC rolled back to $2230, and after a month fell again below $2000. In September, the price of the first cryptocurrency fell from $5,000 to almost $3,000 due to the above-mentioned news from China. After each fall, the cryptocurrency market grew even stronger. Bitcoin has not yet returned at its maximum levels since the start of the recent correction. But almost no one doubts that it will happen. The only question is how long recovery will take. Cryptocurrency market has never grow as rapidly as in December. So the path to new heights can take a little longer than it was before. In addition, it shouldn’t be forgotten that bitcoin experienced much more tangible falls than the current one. The price of BTC surpassed the $1,000 mark as early as December 2013, but after the collapse of Mt. Gox, the largest crypto exchange at that time, and a number of other negative news, the value of the first cryptocurrency for a long time kept below $300.

5. Disappointment of newcomers

In December, when cryptocurrencies became the number one topic on TV not only in economic programs, a large number of newcomers entered the market. All of them expected that bitcoin would keep its growth pace in January, and for many, the drop in price was a real shock. Most of all such a strong correction hit those who bought cryptocurrency with the last money or, what is worse, for funds borrowed. Those who did not witness previous corrections began to act on the principle of "better bird in the hand than two birds in the bush" and tried to minimize possible losses. At this time experienced traders are guided by the rule "until you have sold, you are not at a loss". It is the newcomers who become the main victims of large investors who simply want to buy bitcoin at low prices.

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