On Sunday, Bitcoin dropped 3.7% to $3,939.35, Ethereum dropped 5.4% to $300.47, and Ripple dropped 6.7% to $0.28.
I have been following the recent crash in digital asset prices, and it’s really sad to say; it’s worse than what I expected, and worse than what I saw in 2013’s Mt. Gox collapse. I can’t think of any other explanation for this, other than that the market is over-reacting to the recent hype and FUD that has been spreading throughout the industry. The rest of the world might not have noticed the hype and FUD, but it has certainly caught my attention, and I’m pretty sure that it has caught the attention of many others.
Digital assets are bleeding money again. The total value of all digital assets fell $80 billion on the day, losing more than 20 percent of its value since the end of September. Bitcoin fell below the $6,000 mark, losing more than 10 percent of its value for the second time since August. Ethereum, the second-largest digital currency, fell below the $300 mark, falling more than 30 percent from the September high. The total market cap for all digital assets fell to $558 billion, down from a peak of $870 billion in mid-July.. Read more about bitcoin news and let us know what you think.
The cryptocurrency market was hit by another brutal selloff today. The fact is that this time we really have nothing and no one to blame. Elon Musk hasn’t tweeted anything about cryptocurrencies for over 24 hours, and China hasn’t issued any FUD about cryptocurrencies yet. In fact, the fundamentals seem stronger than ever and all Latin American policymakers have a laser-like vision. The big news of the day, which actually happened yesterday, is this: In fact, this news is very good for bitcoin. Many in the market, including myself, expected President Joe Biden to use cryptocurrencies as a scapegoat for hacking and enact devastating reforms. Instead, they were told what we already knew: It’s easier for authorities to catch criminals using cryptocurrencies than anyone else. Of course, some might think that the fact that the FBI was able to recover the money so quickly detracts from the idea that cryptocurrencies are priceless. However, the hardliners already understand that bitcoin is the most secure network in the world, and the hasty arrest of criminals only proves their ignorance. Nor does it explain the time difference between FUD and decline. No, the only real explanation for the current price declines is that the markets are random, especially in the short term.
Death is coming
One consolation for today’s selling is that it took place on relatively low volume. Unlike the slump on May 19, when cryptocurrency trading saw record volumes, today’s turnover appears to be only slightly above average compared to what we’ve been used to in recent weeks. I won’t post specific stats and charts about this today, but suffice it to say that the above applies to Messari, CoinGecko, CME futures and the Bitcoin blockchain itself. This is a low volume sale. What might increase the fear factor for tech chartists is the impending death cross that threatened to occur and now seems almost inevitable. For those who don’t know: A fatal crossover occurs when the 50-day moving average in the short term (red) falls below the 200-day moving average in the long term (blue). As you can see, a collision seems inevitable at this point. As the meme suggests, the death cross could be a sign that prices may remain subdued for some time. On the other hand, the death cross is always followed by the golden cross (essentially the opposite), which is a very bullish sign. So if prices hit their lows here, we can probably expect a strong recovery when the market is ready. As we know, past results do not tell the future, and reading the charts can only tell us what happened in the past. It tells us nothing about the future. For example, the last two deadly bitcoin crossovers turned out to be false signals. But the previous crypto currency strengthened the cryptozyme.
Perhaps the most downplayed possible explanation for today’s disaster was noted by CoinDesk in this article, which discusses recent changes at the Federal Reserve. In fact, we have followed this policy change by the Fed. Those of you who have been reading this article for a long time know that our bullish base case is largely based on intense money printing by this and other central banks. So it is somewhat concerning that the Fed has recently begun absorbing liquidity in the largest reverse repo transactions in history, as explained in this article. I won’t go into the technical details, because frankly I don’t understand it myself, but it looks like the Fed is currently injecting about $120 billion of liquidity into the market every month. But instead of reducing this exorbitant amount, they prefer to absorb the excess liquidity through reverse repo transactions. The reason seems to be that the liquidity provided to banks for repo cannot be used as reserve requirements and therefore cannot be used as leverage by financial institutions. At least, that’s how I understand it. However, stocks and bonds don’t even seem to have shied away from the Fed’s recent actions, and I don’t see why cryptocurrencies should be more sensitive to Fed policy than equity markets.Digital assets like Bitcoin, Ethereum and Ripple are back in the spotlight today after the Securities and Exchange Commission sent a subpoena to Coinbase, an exchange for trading digital currencies. The SEC has been investigating Coinbase for over a year, and the agency’s probe comes amid a broader crackdown on cryptocurrency trading.. Read more about cryptocurrency and let us know what you think.