Bitcoin dropped drastically in value Thursday morning.
One bitcoin was worth $6,562 at 04:09 GMT, and by 04:44 it had lost $239. The total value of all coins lost was approximately $4.2 billion, or four percent.
Currently, the price is $6,278. The last time that the price dropped to his extent was mid-September, and before that early August, and before that mid-July. Its lowest point this year was in early February, just after the infamous cryptocurrency correction/crash, when it reached $6,203 at one point (from a high of $17,000).
This is the lowest recorded daily volume in more than a year at least (as much as I could squeeze on the chart leaving chart readable) while hovering around the POC of the whole 2018.
This is combined volume from various exchanges pic.twitter.com/cb2KOEoGts
— Edward Morra (@edwardmorra_btc) October 7, 2018
$13 Billion Drop
Of course, Bitcoin does not exist in isolation. Ethereum, XRP and Bitcoin Cash, which are the next-most valuable cryptocurrencies after Bitcoin, all saw a drop of around 11 percent or almost three times that of Bitcoin. In fact, every single one of the top 50 cryptocurrencies’ charts currently ends in a steep cliff.
In total, the cryptocurrency market has lost approximately $13 billion in total in the space of a few hours. But what is the cause?
In March 2018, a sudden drop was attributed to fear of a hack at the world’s biggest cryptocurrency exchange at the time; in April, another crash was attributed to large movements of Bitcoin and government comments.
This time, one cannot ignore the fact that the news today is full of stock market panic.
Stock Market Panic
The Economic Times of India reported on Thursday that $53.9 billion was wiped off the Bombay Stock Exchange in five minutes this morning, while The Times says that London’s FTSE 100 has fallen to a six-month low. Japan’s Nikkei 225 Index lost almost four percent of its value, the Shanghai Composite of China 5 percent, and Hang Seng of Hong Kong 3.5 percent, according to the BBC, all in the last day.
All of this was caused by the American market seeing its biggest drops in months – Nasdaq lost four percent, Dow Jones more than three percent, Amazon lost six percent, according to the BBC.
Donald Trump has laid the blame at the Federal Reserve’s decision to raise interest rates. Others say that the drop was inevitable because the global market was at an all-time high and overdue a correction. Neil Wilson, Chief Market Analyst at markets.com, discussed Sino-US relations and claims of currency manipulation.
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But surely this shouldn’t have affected Bitcoin…right?
Many commentators have called Bitcoin the new gold. That is, a highly valuable commodity which serves as a stable store of value rather than a means of exchange. The argument is that Bitcoin shares many of the properties of gold – it is dividable, portable, has intrinsic value (in that people recognise and respect mathematics), and its value is theoretically independent of the meddling hand of government. In fact, in April, a professor from University College London posited that Bitcoin can be used as a bellwether for the real rates of currency exchange, which governments often try to hide.
Some hoped that it could become a ‘safe haven’ – a commodity or currency where a person can store their wealth with confidence that its value will not be too volatile. Bitcoin, of course, is known to be volatile, but some argue that this is but a teething pain.
However, today’s events suggest that cryptocurrency values very much react to the movements of the financial market.
Yesterday, the Financial Stability Board, a G20 advisory body, released a report concluding that cryptocurrency could present a real threat to financial stability if it were to become more significant in size. In the meantime, it seems that the opposite is true – the traditional financial market is causing harm to the cryptocurrency market.
I officially predict a financial crisis some time between now and 2021.
Not because I have any special knowledge or even actually think that, but so that I can have a ~25% (or whatever) chance of later being publicly acclaimed as “a guru who predicted the last financial crisis”.
— Vitalik Non-giver of Ether (@VitalikButerin) October 10, 2018
Vitalik Buterin, founder of Ethereum, recently jokingly predicted a financial crisis in the near future. But if, as the FSB says, Bitcoin threatens the stability of the market, and, as we saw on Thursday, the market threatens the stability of Bitcoin at the same time, maybe Buterin will unwittingly become the next Robert J. Shiller.
This actually looks pretty good. I think it will bounce.
— The Crypto Dog? (@TheCryptoDog) October 11, 2018