Bitcoin and a large number of cryptocurrencies experienced a sharp crash after touching new price highs this year. On June 26, the price of bitcoin core (BTC) dropped from $13,850 to under $11,900 in less than an hour. BTC values against the USD continued to spiral on Thursday, dropping to $10,350 before recovering slightly. With more than $72 billion shaved off the valuation of the entire cryptoconomy, many traders wonder what the future has in store for digital asset markets.
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Crypto Prices Moved Too Much and Too Fast
At the time of publication, the market capitalization of all 2,000+ coins is around $315 billion. Over the last two days, BTC shed more than $2,500 after rallying from $5,000 in May to $13,850 at the end of June. Currently, BTC is trading for around $10,500-10,700. The question many are asking is whether the rally was a quick flash in the pan or the market is legitimately experiencing a bull run. After the big drop, Genesis Global Trading CEO Michael Moro told the press that he believes the quick snapback was due to too much leverage. “The presence of leverage exacerbates the moves in both directions and affects the speed dramatically,” Moro remarked. “Of course bitcoin has a history of doing this (both upward and downward), but it’s hard to call the magnitude of the move healthy.”
“Even the most optimistic crypto bulls would tell you that a 50%+ move in a week is too much too fast,” he added.
Marketwatch contributor Mark Hulbert believes that the odds are overwhelmingly “above 80% — that bitcoin will crash in coming months.” Hulbert based his forecast on Andrei Shleifer, Robin Greenwood, and Yang You’s research study called “Bubbles for Fama.” Hulbert explained on Thursday that the Harvard researchers discovered that when a price rally exceeds certain thresholds, the odds of a crash grow significantly. “Bitcoin’s recent price action more than qualifies — It has risen more than 440% over the past two years — It is up more than 270% just since the beginning of this year,” Hulbert noted. “The S&P 500 over the past two years is up ‘only’ 20%.”
Hyper Volatile and Facebook Coin’s Possible Push
Of course, not everyone is so dismal about the price, and Fundstrat Global Advisors cofounder Thomas Lee is typically optimistic, but still warned that “Bitcoin is a hypervolatile asset.” On the bright side, Lee said: “This is great for volatility and other dedicated traders.” One of Lee’s coworkers Robert Sluymer, technical strategist at Fundstrat Global Advisors, wrote his opinion in a research note and stated:
A 20%-30% pullback would not be surprising and very consistent with Bitcoin’s recent bull-market pullbacks.
Some speculators think that the spike stemmed from the recent Facebook coin announcement and the effects of the news starting to lose its shine. Craig Erlam, senior market analyst at Oanda, told the media that the latest rally “appears to be tied to the launch of Facebook’s Libra coin and the publicity it has received.”
“Whether people see this as legitimizing cryptocurrencies — being tied to Facebook — or the size of the rally has attracted people seeking quick profits, like back in 2017, isn’t important but it’s clearly helped it find its groove again,” Erlam observed in his analysis.
Staircase Up, Elevator Down
Alistair Milne, a chief investment officer of the Altana Digital Currency Fund, opined that the price of BTC went up so fast it was bound to drop. “[The correction] was inevitable — you simply don’t go up this quickly and sustain it forever, followed by consolidation — This is not 2017’s boom and bust, we haven’t seen new retail investors coming in as we did [then],” Milne explained.
Many traders are uncertain what will take place next in crypto-land. Former Fortress Investment hedge fund manager Michael Novogratz told Bloomberg on Thursday that he sold the day before and wished he had sold more. The news outlet revealed that Novogratz is “exasperated” by BTC’s swings in value. To observers, it’s anyone’s guess what these crazy crypto markets will do next. On a side note, the BTC mempool has been heavily backed up over the last 72 hours. At press time there are 82,000 transactions waiting to confirm and it’s quite likely many of those stem from exchange traffic.
Where do you see the price of BTC and the cryptoconomy going from here? Let us know what you think in the comments below.
Disclaimer: Price articles and markets updates are intended for informational purposes only and should not to be considered as trading advice. Neither Bitcoin.com nor the author is responsible for any losses or gains, as the ultimate decision to conduct a trade is made by the reader. Always remember that only those in possession of the private keys are in control of the “money.”
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