Over the last week, the crypto markets have fallen over $66 billion. This means that one-third of the total market cap has disappeared.
Many people are speculating about various reasons that might be behind the fall. Here are seven possible:
1. Bitcoin cash split into two
Bitcoin cash made a so-called hard fork on November 15th. The hard fork ended with bitcoin cash dividing itself into two different currencies: “bitcoin cash abc” and “bitcoin cash sv”.
The split does not appear to have been particularly well received by the market and the value of bitcoin cash has decreased by almost 50 percent, according to data from the crypto exchange Binance.
2. The bitcoin cash war
An extracted so-called “hash war”, which is a competition to get as much mining power as possible, between “bitcoin cash abc” and “bitcoin cash sv” is ongoing. This means that both sides currently make big losses when mining both versions of bitcoin cash, according to data from the crypto exchange Bitmex.
“Bitcoin cash abc” proponent Roger Ver writes on Twitter that nobody wins in the ongoing “war”. In addition, several people on the forum Reddit have speculated that both sides are selling large amounts of bitcoin to fund the mining of the various versions of bitcoin cash.
No one wins a war.
Some just lose less than others.
— Roger Ver (@rogerkver) November 18, 2018
3. U.S. Securities and Exchange Commission goes against ICOs
The U.S. Securities and Exchange Commission (SEC) has fined the U.S. companies Airfox and Paragon for their ICOs that have been considered unregistered securities sales.
Both companies are required to pay $250,000 in fines and the SEC has announced that investors in the ICOs have the opportunity to get back their investments in the companies, Bloomberg writes.
“Projects are being made to return investor money, which, after having spent a ton of money marketing their $100 million ICO on a lavish party-filled road-show that was the norm for this vintage of ICOs, will be tough”, says Justin Litchfield, chief technology officer at Prochain Capital, according to Bloomberg.
4. Bitcoin has broken through important support zones
Over the last week, the bitcoin price has broken several important support zones, including the psychologically important $6,000 zone, which allegedly has triggered several so-called “stop losses”, which is automatic sell orders, that caused the price of bitcoin to fall further.
Below $6,000, the bitcoin price still did not show any buy signals and when the price did not succeed to recover fast, it’s believed that it had triggered additional sell signals for bitcoin, CCN writes.
These movements are then believed to have been reinforced by algorithm trading and trading bots that sell and buy automatically based on different signals that the market shows.
5. Stock markets around the world are falling
During Monday, the American stock exchange Nasdaq (-3,03%) dropped in value, and large shares like Facebook (-5,72%) and Amazon (-5,09%) fell in price. This may have contributed with increased concern for investors in the crypto market.
People like Tom Lee, chief of strategy and market research at the analyst firm Fundstrat, have said that the correlation between the stock market and the crypto market is very limited and does not affect each other that much, something Cointelegraph previously has written about.
However, other people like Christopher Harvey, head of private equity at the bank Wells Fargo, say that there is certainly a correlation between bitcoin and the stock market. According to him, a hit on the stock market can cause bitcoin investors to sell in panic too.
“It sometimes adds fuel to the fire”, Christopher Harvey said, according to Cointelegraph.
6. It is a bear market
The crypto market has lost value in 2018 – from being valued at $830 billion at the beginning of the year to a value of $145 billion on Tuesday. This is a total decline of more than 82 percent from the peak in 2018.
Many in the crypto world say that the crypto market is currently in a so-called “bear market”, which means a downward trend in which sellers control the market. In a bear market, there is also a pessimistic view of the future, which means that the selling pressure for an asset often continues downwards, regardless of what news is coming, according to the site Investopedia.
7. Sales of cryptocurrencies to pay taxes
Many people made big profits during the sharp rise in the crypto markets in 2017. If you have sold your assets and realized these profits in the same year, they must be taxed now in 2018.
It may be that many people have been waiting for a new rally during this year, but now must sell their bitcoin assets, that they have held, to finance the taxes.