Yesterday, the price of bitcoin suddenly plummeted from $6400 to $5500 in a matter of minutes. It’s one of the biggest and most sudden price drops in bitcoin history.
What caused yesterday’s bitcoin price drop? Is this a short-term market movement or a sign of long-term trouble?
David Z. Morris at BreakerMag.com recently answered that question in his article titled, “Unpacking the Bitcoin Price Drop.” Morris reached out to some of the industry’s biggest analysts – including Tim Draper and Nic Carter – to understand the reasons behind the flash crash.
There were a number of reasons for the latest bitcoin price drop. Let’s take a look at a few of the reasons why the price of bitcoin suddenly dropped $1,000, taking other cryptocurrencies down with it.
Broader Stock Market Sell-Offs
After months of surging growth, stock markets have suddenly entered negative territory on the year. There are global stock market sell-offs – and it’s possible that is causing strain on the cryptocurrency market.
Some believe dodgy exchanges are to blame. Carter, in his interview with Morris at BreakerMag.com, for example, had the following to say:
“I think that when volatility left, a lot of volatility junkies left too, and it was a matter of time before they exited to fiat. The sharpness of the drop is at least partly due to the cascading liquidations at dodgy exchanges that optimize for that mechanic.”
These exchanges have been capitalizing on crypto volatility for a significant period of time. Now, these same exchanges are exiting into fiat to realize their gains, leading to plummeting crypto prices.
Behind The Scenes Regulatory Movements
Others believe yesterday’s flash crash was motivated by something more frightening: behind the scenes regulatory information.
“If I had to guess, behind-the-scenes regulatory enforcement scuttlebutt to which we mere guppies are not privy,” explains Preston Byrne to BreakerMag.com.
In other words, a major regulatory agency could be preparing to announce serious enforcement actions against crypto. Certain insiders are privy to that information and are exiting now. The public might not hear about this regulation for days, weeks, or months.
Tim Draper Insists Bitcoin Will Be Worth $250,000 by 2022
Bitcoin is at its lowest price in over a year. The bear market continues to grip the market.
Despite market pessimism, however, the crypto community has one serious optimist: Silicon Valley venture capitalist and crypto evangelist Tim Draper.
“My only prediction is $250,000 by 2022.”
Draper added that he doesn’t worry about short-term bitcoin price drops against fiat currencies:
“All fiat political currencies will continue to be volatile against bitcoin as they fluctuate into irrelevance. All movements are temporary; down movements provide buying opportunities in bitcoin for people with a vision of a better future.”
In other words, one bitcoin will always be worth one bitcoin, and the short-term exchange rate into fiat currencies is unimportant, especially as those fiat currencies decline into irrelevance.
Is This Similar To The 2014 Bear Market?
The analysts were also asked if this latest flash crash was similar to the bear market of 2014-2015 that gripped bitcoin. The analysts agreed that this crash feels different (in a good way):
“In 2014 I was worried that bitcoin would be abandoned. I’m not worried about that anymore, so this a breeze by comparison. Tokens with no discernible reason to exist should be worried though.”
Where Will Bitcoin Be On December 31, 2018?
Finally, the analysts were asked where they believe bitcoin would be on December 31, 2018. Here are their responses:
- Jobanputra: “Likely back to the $6,000-6,500 range”
- Pompliano: Sub-$6,000
- Carter: $5,500
- Byrne: $4,325
- Draper: “My only prediction is one bitcoin will be $250,000 by 2022.”
Conclusion: What’s Next For Bitcoin?
As we go to press, bitcoin is sitting at a price of $5498, with other cryptocurrencies reporting similar lows. It feels like we’ve seen numerous market bottoms throughout this past year. Is this the real bottom? Or is there still more pain in the future?
You can read the full interview with the bitcoin price analysts here at BreakerMag.