By the end of the session bitcoin BTCUSD, +1.53% closed down 11.6%, the third-largest decline of 2018, only topped by the 16.5% fall on Jan. 16 and a 15.5% slide on Feb. 5, according to Dow Jones Market Data.
With average investors licking their wounds, it’s now time to look at the potential catalysts for the bitcoin crash:
On Thursday, the fourth-largest digital currency, Bitcoin Cash BCHUSD, -5.40% was set to hard fork and split into two currencies. The move has divided the cryptocommunity with no clear consensus, TKTKwhich coin with attractTKTK the majority of miners and computing power. “This drop in price is more than likely due to upcoming hard fork scheduled by Bitcoin Cash,” said Marcus Swanepoel, co-founder and CEO of Luno, a cryptocurrency trading wallet.
“The Bitcoin Cash blockchain has been undergoing scheduled hard forks every six months to upgrade and improve the protocol. In most cases, these hard forks are uncontested with the whole community supporting them. In this case, however, consensus couldn’t be reached with two factions emerging, and proposing different solutions for the upgrade.”
The war of the hard fork has seen two of bitcoin’s biggest personalities clash. Roger Ver, who is in favor of the status quo and Craig Wright who is championing the new Bitcoin Cash, known as Bitcoin SV (Satoshi’s Vision) have been trading blows about where miners should commit their resources.
“It’s safe to say that Bitcoin Cash’s upcoming hard fork was stirring uncertainty amongst crypto investors, and forecasters across crypto and traditional markets alike have predicted a prolonged bear market heading into 2019,” said Donald Bullers, North American rep for Elastos, a decentralized software company that stores personal data.
Waning interest in digital currencies
After months in the doldrums that pushed volatility of bitcoin to record low levels, questions around overall interest in the nascent industry have grown. Data from bitcoinity.org shows a steady decline in trading volumes in 2018.
Moreover, as volumes have fallen, one analyst noted that the pace of the decline suggests adoption of digital currencies has stalled. “The speed with which cryptos crashed Wednesday indicate that there is very little fresh money, buying interest in the market and that stops were limited in size,” said Nick Cawley, markets analyst at Daily FX.
For technicians, the charts told the story. The longer bitcoin held $6,000 without moving higher, the more vulnerable it became to a sharp decline if it
“[Bitcoin] has just broken below a 12-month support band defined by the February, April, June and August-October lows, we would caution traders/investors from presuming this breakdown is a headfake,” said Rob Sluymer, technical analyst at Fundstart Global Advisors, in a research note.
Even more concerning for the HODLers—a group of investors who relentlessly hold on to their investments despite market gyrations—Sluymer noted that the move may have further to go. “This week’s breakdown raises the risk [bitcoin] will test next support near 5000 with next major”, he added.
But, for true crypto-anarchists, it may take more than a 10% decline to adjust their crypto holdings. “The simple fact is that I am not selling bitcoin in my portfolio, in fact, I am not even interested in this day to day market action,” wrote Naeem Aslam, chief market analyst at Think Markets U.K.
“So the recent sell-off hasn’t changed my view about the technology or the potential it has. Wait for the currency or the debt crisis and the day it knocks on the door, guess who is going to answer the door? Bitcoin.”