Bitcoin (BTC) began a downward slide after weeks of stagnant prices, sinking below the $6,300 level despite expectations that the stability could precede a rising trend. Here are five probable reasons for the souring sentiment.
As of 8:30 UTC, BTC prices moved to $6,281.17, down 4.2% in the past day. Curiously, BTC traded at $6,312.60 on Bitfinex, which saw the highest activity among Bitcoin markets. On Coinbase Pro, the price slid as low as 6,212.51.
Here are five possible reasons for the souring sentiment.
Bitfinex jitters: In the past few days, the relationship between Bitfinex and Tether (USDT) exhibited some curious developments. After Noble Bank showed signs of trouble and stopped servicing Bitfinex and Tether, loss of trust in the exchange and the stablecoin led to fund withdrawals. In the past month, half of the BTC deposited in the Bitfinex cold wallet flowed out. Additionally, 100 million USDT left circulation. On Kraken, someone tried to sell millions of USDT for dollars, depressing the price to $0.98, which is a significant movement for a dollar-pegged coin.
This exodus from the Bitfinex and Tether ecosystem shows a potential loss of trust. Since Tether is so influential and has spread to most of the leading exchanges, this loss of trust may be a trigger for what the crypto community sees as a new Mt. Gox event.
US Senate hearing on cryptocurrencies: A hearing before the US Senate Banking Committee is expected to feature heavy criticism of the crypto sector. For enthusiastic newcomers, those pitfalls and flaws were often glossed over. But with the bear market having a sobering effect, the hearing may further sour retail sentiment.
The testifying experts, Nouriel Roubini and Peter Van Valkenburgh, have prepared a review of the crypto sector pitfalls, exposing scams and faulty trading practices along with demystifying blockchain technology.
Since the selling happened on the US markets, the hearing may continue to affect the sentiment of US-based traders. The US is one of the engines of growth for the crypto sector, so a withdrawal of these investors could further drag down the market.
Miner worries: The Bitcoin mining economy is also at a crossroads. Competition and farm building peaked in the first half of 2018. It is possible that miners will attempt to sell BTC to recoup costs. In the past days, peak hashing power has coincided with falling rewards for existing miners. One possible reason is that Bitmain has activated ASIC Boost for its mining rigs, making it more difficult for other miners to obtain rewards.
As of June 2018, over 80% of #Bitcoin mining is performed by six mining pools and five of those six pools are managed by individuals or organizations located in China.
So this is really worrying. And $BTC maximalists must look at this as a huge threat. China controlling BTC
— Phillip Nunn 🚀 (@PhillipNunnUK) October 10, 2018
The Bitcoin hashrate has been unstable in recent weeks, falling and rising by nearly 20% on occasion. This instability has led to unpredictable rewards and a difficult situation. With miners “following the money,” low rewards and a sliding market price may also lead to a deterioration in sentiment, possibly sell-offs and farm closures.
Capitulation event: Bitcoin and all other assets had several big shakedowns in recent months despite expectations of one big “capitulation event” bringing down prices once again to much lower levels. In the short term, the latest sell-off may spell the end of hopes for a December rally, seeing Bitcoin behave once again like in 2014 and 2015, when prices were almost flat, with losses pushing them lower and lower. After a very active 2017 and a prolonged price slide in 2018, traders and crypto enthusiasts may be deciding to abandon the market or wait on the sidelines.
The stock market crash: Initially, Bitcoin was seen as a hedge against stock market risk since its price movements seemed to defy gravity. However, the slide of the Dow Jones index by 1,000 points within days has rekindled fears for the traditional world of finance. With mainstream financial markets lacking exuberance and a taste for risky investments, Bitcoin may once again have to wait for the inflow of institutional money.
Neither the author nor the publication assumes any responsibility or liability for any investments, profits, or losses made as a result of this information. Cryptocurrency trading and investing are risky propositions, and market participants are advised to always conduct thorough research.