Bitcoin Price Trounces 24-hour Record, Drops By Over 20%
No sooner than 24-hours after the article has been published and several comments followed Bitcoin’s reported feat as it reached a record new $18 billion market cap on Wednesday January 4 that its price dropped by more than 20% within four hours.
On Thursday, the market cap fell quickly to $16 billion within the period. The uncomfortable development for many Bitcoin enthusiasts worldwide seems to answer a question posed in one of the comments for the article which says: “Will bitcoin be able to survive that long?” No one can say for sure. What is certain, however, is that the jubilation has been cut short – at least for now.
Going by figures from CoinMarketCap, Bitcoin’s price dropped from $1186 at about 8 A.M GMT+1 to $910 by 13:20 GMT+1. Several theories have been making the rounds about the rationale behind the drop, some of which have not been proven. One of such is that the Chinese yuan gained strength against the US dollar for the few hours the dip lasted for.
Reports say the yuan was earlier trading at about 6.92 rmb to the dollar before the Bitcoin price slump but later dropped to 6.88 rmb. While those in support of this view think that the drop in the dollar value may have had much impact on the cryptocurrency because the Chinese market is the main driver of Bitcoin price, others think such a drop of over $200 in the price of Bitcoin should not be attributed to the slight change in the yuan and dollar value.
The two-day rally offshore and skyrocketing interbank rates record posted by China’s currency probably caused a panic that pushed more Bitcoin selling than buying.
The frenzy caused by the panic was worsened by those who wanted to catch in on the situation as an opportunity to buy the dip as the price started plummeting fast. Some of those who used the Coinbase exchange for this purpose but couldn’t access the website because it reportedly crashed due to higher traffic of sellers created more fear. There are suggestions that this could have happened to avoid a sell-off of profit taking as it claimed that early Bitcoin adopters own most marketable coins and own the exchanges hence they control the currency as they wish.
US Feds December meeting
In another twist, a foreign-exchange and rates strategist at Macquarie Bank Ltd. in Singapore, Gareth Berry, told Bloomberg that multiple references to dollar strength in the minutes from the Federal Reserve’s December meeting which was published on Wednesday January 4 was a key factor.
The minutes also revealed that the US central bank expects a surge in spending during the Trump administration which has been debated extensively in some quarters.
Some traders stated that the minutes showed that officials were uncertain about how the policies of president-elect, Donald Trump, will possibly impact on growth. They cite this as a factor that spurred selling by macro and leveraged funds in Asia.
The currency has since been on a recovery path with the 24-hour transaction volume soaring to over $400,000 immediately after the dip and up to $514,000 at some point – a volume it has never reached in its eight-year history. Let’s hope it gets to reach its previous height and even surpass it this time.
Olusegun Ogundeji writes on tech-related issues including from the crypto/Blockchain space.
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