Bitcoin Crash: Five Possible Reasons for BTC’s Drop Below $8,000
Bitcoin appreciated fast at the end of last year, with $1,000 days becoming a common occurrence. But now, the price is getting weighed down as panic sets in.
The drop in prices for Bitcoin was predicted at nearly $20,000, although some still believed the coin had enough power to reach as high as $40,000. And yet the slide has happened, with no bottom in sight, as prices burrowed below $8,000, levels at which many have signaled an intention to liquidate.
Here are the five possible leading factors that are putting pressure on Bitcoin's price now:
- The January sell-off, getting oversold: It is reasonable that some investors would try to take profits, since a price above $10,000 seemed rather attractive. But the selling continued, becoming worrying. Then, panic started to set in, as Bitcoin retraced and broke below $10,000.
At the same time, altcoins continued to be attractive, drawing out some of the funds from Bitcoin.
The combination of factors is the easiest one to recover, although for now, no rebound is in sight. But at the same time, Bitcoin's dominance has grown, from around 33% to more than 37% within hours, as altcoins are being sold off.
- Korea panic-selling: Right now, the price in Korea has taken the opposite stance. Usually, assets traded at a premium on BitHumb. Now, Bitcoin is below $8,000 in Korea, and above $8,100, especially on exchanges where Tethers are involved. The inability to sell for cash has made investors wary of becoming locked in a Tether position, just as the fixed-value digital coin is gathering more skeptical reviews.
Korean prices have been included in the general calculation at CoinMarketCap once again, and this time, the effect is negative.
- Bitcoin is just out of fashion: The last large drop in altcoins in September, while Bitcoin continued to grow, almost positioned Bitcoin as the only meaningful digital asset. And most were right at that time: Bitcoin was used to settle trades, was an on-ramp currency, and was seen as a store of value. But as months passed, the landscape changed.
New platforms are growing by leaps and bounds, decentralized exchanges are starting to make claims, and digital assets may start to exist without the need for Bitcoin. In other words, the new investors are realizing that Bitcoin is not all that great, and that a new digital asset, held over the years, may offer more growth potential, and maybe even utility.
- A Concerted effort: this suggestion is in the realm of probabilities. But as Bitcoin has grown to overheated prices, some investors may have wanted to dial back the clock, and crash the prices. At this point, owning Bitcoin is a bet on the future - owning Bitcoins may prove to be quite meaningful, if the brand survives. And now, there are chances to do this at much lower prices. Market manipulation may mix with the general bearish mood, and produce much lower positions for BTC.
- The unraveling of Tethers: the story of USDT tokens has frightened almost everyone in the crypto community, and it has reached mainstream media like the New York Times, and Bloomberg. Tethers served as a form of credit liquidity, which lifted up the price of Bitcoin.
Now, it is unknown whether the Tethers mint would produce more of those tokens - in other words, cutting off the "easy credit" for buying Bitcoin. Without the engine of margin trading and extra liquidity, the Bitcoin price may have difficulties rising once again with such ease.
Of course, the drop in prices may be just the market coming to its senses, after months of irrational exuberance. At this point, we may see the price dropping further, and the best scenario appears to be a consolidation in the $7,000 - $8,000 range, which may be followed by a bounce.