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Why Bitcoin Price Dropped: 5 Potential Reasons to Consider

November 15, 2018 at 18:02 by Arathur Stephen

The price of Bitcoin (BTC) significantly expanded its losses on Wednesday, dropping below $5,400 and reaching its lowest since late last year. According to CoinDesk price data, the flagship cryptocurrency declined to as little as $5,390, losing more than 10% in the space of 24 hours and hitting a fresh 2018 low. Other altcoins followed with steeper losses too.

This downward trend happened as the broader cryptocurrency market also experienced remarkable losses. According to CoinMarketCap,  the total market capitalization of $210 billion declined earlier in the day to about $180 billion at about 15:30 GMT.

When trying to figure out the reason for the sharp decline, analysts have generally blamed it on either technical analysis or the uncertainty surrounding the Bitcoin cash (BCH) hard fork scheduled for Thursday. Today, we share with you 5 potential reasons that have negatively impacted the price of the king of cryptocurrencies.

5 Potential Reasons Why Bitcoin Price Plummeted

#1 The chaos surrounding Bitcoin Cash

The market reacted negatively as the BCH network was warming up for a hard fork which would trigger an aggressive attempt to take over through a 51% attack. There was a perception that digital assets are immutable to attack than expected since networks are dependent on human behavior. The uncertainties surrounding Bitcoin cash as well as Bitmain could be putting pressure on Bitcoin prices.

The CEO of cryptocurrency fund of hedge funds BitBull Capital, Joe DiPasquale has shared the same viewpoint. He has been quoted as saying:

(Yesterday’s) sharp drop in Bitcoin price is a result of both the Bitcoin Cash dispute (the upcoming fork) and the increasing pressure on the $6K price point. Over the last several months, that price point has been repeatedly tested, and bounced back above it but to lower and lower highs.

The CEO further noted:

While many were seeing the rebuffing of the $6K price point as support, at BitBull we argued that the more the $6K price point is tested, the more likely it was to break.

#2 Miners giving up

Bitcoin mining is a thin-margin game. At the moment, miners are giving up slowly after prices declined to $6000. Miners have to deal with high mining difficulties along with dwindling BTC price. Most miners are now expected to break even at $5800 but with an expectation that the price would increase. The long wait and the anxiety of an eventual price decline reduce mining operations with some running at a loss.

#3 Trader’s exodus to USDT

According to the latest data from CryptoCompare, the BTC/USDT pair took up more than 62% of all trading, indicating an attempt to ditch BTC for a more stable-priced coin. There are fears that Bitcoin is not stable thus prompting some traders to quickly invest their funds with coins that they perceive to be more stablecoins, such as TrueUSD (TUSD) and USDC, which trade above $1. This shows that traders’ confidence in Bitcoin is gradually dropping.

Furthermore, the Tether treasury wiped off 70 million USDT from circulation on November 11, possibly decreasing liquidity on the Bitfinex exchange. Hence, the reduced number of USDT available may not be sufficient in the meantime to ignite a significant rally.

#4 Bitmex speculation

On Bitmex cryptocurrency exchange, prices and volumes are not added in the general Bitcoin statistics, thus making trading speculative and highly risky. Bitcoin prices dropped to as low as $6,088, due to derivative activity. This indicates that the bearish sentiments for BTC might have spilled over to other markets.

#5 Lower bottom expectations

There are still beliefs that the bear market has not bottomed yet since several technical indicators are pointing to a continuous bearish move that could even drag Bitcoin price to as low as $4,000. The absence of even a hint of a year-end bullish rally has further contributed to the negative expectations.

After several failed attempts to hit upside, suspicions of a bearish breakout surfaced and many long holders would eventually give up and the price would drop to a new year low.

If you have any questions and comments on Bitcoin today, use the form below to reply.

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