Bitcoin (BTC) Drops Below $6,000: 5 Reasons for the Recent Drop
Both BTC and altcoins accelerated the losses as the day progressed, and finally started to break down.
Bitcoin (BTC) expanded its losses on Wednesday, and altcoins followed with steeper losses. BTC unraveled to as low as $5,700 within minutes, quickly abandoning previous lows of $6,192.91 as of 4:00 UTC. While the general negative mood is the chief pressure on the BTC price, there are also last-minute factors pushing the price lower.
BTC later recovered to around $5,585.50 on Bitmex, pressured by speculative trading, and other exchanges saw levels of around $6,200, lower than the usual range. Here are the 5 latest factors acting on the price of Bitcoin:
Chaos surrounding Bitcoin Cash: As the Bitcoin Cash (BCH) network prepares for a hard fork which would entail a hostile attempt at a takeover through a 51% attack, the markets started to react with negativity. The potential attack of miners is an event that undermines the narratives of the immutability of digital assets, and shows that in fact networks are fragile and dependent on human behavior. The unknown outcome for BCH and by extension Bitmain may be putting pressure on BTC prices.
Miners giving up: Bitcoin mining is a thin-margin game. BTC prices above $5,800 are the absolute minimum, and some mining operations may not be viable even at higher prices. Miners face high difficulty, and may start to unwind their operations. Selling is essential to miners, to keep covering operating costs.
Trader Exodus to USDT: The latest data from CryptoCompare show that the BTC/USDT pair took up more than 62% of all trading, showing an attempt to leave BTC for a stable-priced coin. In the past couple of weeks, USDT trading was relatively subdued, taking up just 44% of volumes. However, activity on Bitfinex suddenly increased, despite the fact that the effective price of BTC was $330 higher on Bitfinex. USDT has also broken below its dollar peg, once again trading at $0.97 on Kraken. The events are helping exaggerate the fears around Bitcoin’s general stability. However, the USDT still serves as a temporary safe haven, although traders also park their funds in other stablecoins, such as TrueUSD (TUSD) and USDC, which trade above $1.
Additionally, on November 11, the Tether treasury mopped up 70 million USDT from circulation, potentially decreasing liquidity on the Bitfinex exchange. The lower number of USDT available may not be enough right now to spark a significant rally.
Bitmex speculation: Bitmex, an exchange where price and volumes are excluded from general BTC statistics, and trading is highly risky and speculative. Bitmex prices have fallen as low as $6,088, based on derivative activity. The price shows the sentiment for BTC is still bearish, allowing speculation to spill over on other markets.
Lower bottom expectations: There are still beliefs the bear market has not seen more selling and capitulation, which could pressure BTC as low as $4,000. The lack of even a hint of a year-end rally is adding to the negative expectations. The stagnant prices of the past month may not be the bottom for BTC, hence the reluctance to bet on a price increase happening soon. Altcoins are making the panic even more significant, as some projects may never recover, both in dollar and BTC terms. As BTC prices have to defend key levels above $6,000, the predictions of an even lower bottom are starting to become a self-fulfilling prophecy.
Neither the author nor the publication assumes any responsibility or liability for any investments, profits, or losses made as a result of this information. Cryptocurrency trading and investing are risky propositions, and market participants are advised to always conduct thorough research.