No one knows for sure why Bitcoin dropped. It is likely technical, but I suspect part of the answer is related to the current Bitcoin Cash “hash and cash” wars.
Let’s put it this way, here are some reasons “why” we could have dropped:
- Purely technical. Low volume test of the bottom of the recent range, shorts were at a recent low, bottom was tested one too many times, and the result was we broke through the bottom of the overarching 2018 triangle.
- The nice alt runs recently have simply resulted in a standard correction, but for coins like BTC, ETH, LTC, and ETC that didn’t have nice runs, the correction period is a little brutal.
- The Bitcoin Cash Drama resulting from the upcoming fork (that I am dubbing “the Hash and Cash Wars”) is having a bigger ripple effect than crypto traders are giving it credit for. This is either an excuse or a valid reason.
- Weakness in the stock market, especially in tech is leading to speculators liquidating crypto. Also, hedge funds who had crypto holdings selling toward the end of the year.
- Something else I’m not thinking of (maybe there is some ETF or Bakkt thing only small groups know about).
All those could be reasons, and generally I tend to favor the “purely technical” explanations, especially when the charts indicate that this could be the case. But, it is at least worth thinking about the Bitcoin Cash war.
Here are some points on that:
- Ver’s ABC and Craig Wright’s SV are in potential battle to the death, and each camp has a good bit of money (“cash”) and miners (“hash” power) behind them. They are fighting over block size. Without going into details, SV looks like it might be able to break ABC due to having more mining power. In the worst case, this has the potential to cause chaos in the mining community and development community, and it could affect BCH holders and impact BCH adoption. Consider, everyone who has been holding BTC long also ended up with BCH and now will be in for this fork. So big players generally have exposure to BCH via holding, mining, running a business, etc.
- Exchanges like Coinbase and Kraken seem to be favoring ABC and calling it BCH. Problem is, in this fork it is super unclear which chain will win or if both will win. I’m not saying exchanges are doing wrong, but at the end of the day anyone holding or trading BCH on an exchange that won’t credit both forks for sure is putting their funds at risk.
… also like, consider this Tweet from Craig Wright:
To all BTC miners…
If you switch to mine BCH, we may need to fund this with BTC, if we do, we sell for USD and, well… we think BTC market has no room… it tanks.
Think about it. We will sell A Lot!
And, have a nice day
(BTC to 1000 does not phase me) pic.twitter.com/oUScEahtWc
— Dr Craig S Wright (@ProfFaustus) November 14, 2018
In short, there are some solid BCH related reasons to go to cash and panic a bit, and as one of the bigger coins this could be having a ripple effect. Put that together with the technicals and sellers in the stock market and the correction / crash adds up.
In sum, I tend to favor the technical reasoning, but the BCH thing is… a thing.
That said, it isn’t all bad news. There is still a chance of a reversal for one, and for two, whatever support crypto finds might prove to produce more volume and could potentially become the bottom of the 2018 bear.
Also, since the “reason” for the drop was BCH drama, if the fork goes off without a hitch tomorrow and we all end up with 2 viable BCH tokens, it could actually work as a reason for the market to rally (not to mention if tech stocks can pick themselves up a little).
It is never fun to lose money as a holder and see drama, but if we are being forward thinking, then each event simply provides the next opportunity to find a way out of the bear market.
In short, the point at which there is no hope is far below where we currently sit. Today didn’t go well, but there is a lot that can go right with crypto in the coming weeks, months, years, etc.