Bitcoin flash crash: What are the reasons for the BTC price drop?

  • The cryptocurrency market suffered a sell-off in the past 24 hours, which probably reminds many investors of the past bear market.
  • As a result of a flash crash, the Bitcoin price dropped by more than 13 percent within a few hours and is now at 8,450 US dollars (at the time of writing).
  • The reasons can only be speculated upon. However, there are some events that could have led to the flash crash of Bitcoin and all Altcoins.

After the Bitcoin price moved in a sideways trend in the past months, there was a sudden crash yesterday. As part of this, the BTC price briefly dropped below the important USD 8,000 mark, breaking through some important support lines in a very short time. At the time of writing, Bitcoin was quoted at around 8,450 USD and recorded a sharp drop of around 13.7 percent within the last 24 hours.

The flash crash caused Bitcoin (BTC) to fall below USD 9,000 for the first time since June. But not only Bitcoin, but the entire cryptocurrency market is writing deep red figures. The top old coins also posted double-digit losses: Ethereum fell by 15%, Ripple by 11%, Bitcoin Cash by 24%, Litecoin by 17% and EOS by 21%.

As always, we can only speculate about the reasons for the flash crash. Nevertheless, there are some interesting theories that could explain the collapse. We will introduce you to these in the following.

Bitcoin hash rate suddenly drops by 40 percent

As has been reported by many portals, the Bitcoin hash rate has briefly collapsed by more than 40 percent. According to the reports, this unexpected collapse could have led not only to astonishment, but also to uncertainty in the crypto and mining community. Within various forums, theories have been spread that mysterious changes are taking place on a fundamental level.

But soberly, a short-term drop in the hash rate is nothing to worry about. As the graph of shows, the BTC hash rate always fluctuates, sometimes up and sometimes down. It only becomes critical when the hash rate falls over a few days. However, this is clearly not the case, as the graph from shows.

bitcoin hash rate crash

The decrease in the hash rate was probably caused by the inherent variance in PoW mining and does not reflect the misconception that Miner is leaving the BTC network, as James Prestwich, founder of Summa One, summarized.

Disappointment with Bakkt

Another factor for the collapse of the BTC price could also be the disappointment about the weak start of the Bakkt Bitcoin futures. As we reported yesterday, only 73 Bitcoin (BTC), worth just under USD 700,000, were traded in the first 24 hours.

Compared to the Bitcoin futures on the CME, which unlike the Bakkt futures is not covered by Bitcoin (BTC) but only by Fiat money, this is only a fraction of the trading volume. Bitcoin futures worth over USD 350 million were traded on the CME last month.

Expiration of CME Futures Contracts

Furthermore, the expiration of the Bitcoin futures on the CME could have been a decisive factor. The flash crash coincides (once again) with the imminent expiration of the CME Bitcoin futures, which in the past have triggered an average 10 percent drop in Bitcoin’s price. CME’s monthly Bitcoin Futures contracts always expire on the last Thursday of the month.

Within the crypto community, there is a theory that whales on the CME bet on a falling Bitcoin price and then on the spot market by shortening Bitcoin (with leverage) cause a price collapse. Of course, this manipulation cannot be proven. However, it is very noticeable that the expiration of the monthly Bitcoin futures contracts in 2019 almost always coincided with a strongly falling Bitcoin price. This theory could have been confirmed again.

Crypto Whales Move Large Quantities of Bitcoin

It is also noticeable that the crash once again coincides with numerous “whale transactions”. As Whale Alert reported, crypto whales have transferred large amounts to Bitcoin. In total, whales have moved over 37,000 BTC worth over 320 million US dollars in the last 24 hours. The largest single transfer sent 10,000 BTC worth 86 million dollars between two wallets of unknown origin.

SEC rejects further Bitcoin ETF

After VanEck and SolidX withdrew their highly anticipated application for a Bitcoin Exchange Traded Fund (ETF) a few days ago due to a lack of prospects of success, the decision for the next ETF application has now been postponed by the US Securities and Exchange Commission (SEC). In a letter published yesterday, the SEC requested more time to decide on the NYSE Arca and Wilshire Phoenix applications.

Due to the recent postponement, the SEC is now legally required to make a final decision within 35 days and is seeking further comments in the meantime.

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About Author

Please follow me on Twitter for deep analysis. Collin is a Bitcoin investor of the early hour and a long-time trader in the crypto and forex market. He's fascinated by the complex possibilities of blockchain technology and tries to make matter accessible to everyone. His reports focus on developments about the technology for different cryptocurrencies.

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