After several weeks of mostly lateral movement, the price Bitcoin woke up this morning. The price of the original cryptocurrency fell, dragging the rest of the cryptocurrency market with it and leaving behind a sea of red.
Although this has confused commentators, the latest Bitcoin price movement is further evidence that cryptocurrency is not mandatory for the predictive indicators used in traditional analysis.
The last drop in prices occurred despite positive changes throughout the industry, whether Pound on Facebook, anticipating an event related to the contraction next year, or easing the regulatory rollback that characterized the early years of Bitcoin. Even the basic principles that underlie Bitcoin, such as the hash rate and the number of transactions per second on its network, remain unchanged. The difficulty levels of the algorithm used to generate bitcoins have also dropped this month.
What caused the fire then?
The consensus seems to be building around the trading actions of the market bears. “Having endured tougher conditions over the past three months, investors appear to have weighed their options and eToro's own platform continues to see increased activity at the current price,” Adam Vettese, trading platform analyst at eToro, said today.
The rapid drop in bitcoin prices yesterday morning seems to confirm Vettese's thesis of increased activity. Within six minutes, Bitcoin's price lost 4,2% of its value (roughly $ 330) to $ 7252,32 per coin.
“There are a lot of short-term players in the market, and it’s their job to make money,” said Dmitry Berenzon, research partner at Zenith Ventures, a blockchain-focused venture capital fund.
“I think that falling prices are not surprising to me in the risk associated with a volatile asset,” he said, adding that fundamentals, whether data or development related, were more important. “When I looked at the on-chain performance, I didn’t think anything special had happened,” he said.
Investors and traders looking for quick profits are usually blamed for the bearish price movement. But out of the morning drop in prices, another name emerged: miners.
Weak miners, or miners without scalability, go out of business when the price of Bitcoin falls because it becomes unprofitable to manage expensive rigs. According to Willie Wu's stats, they may have exacerbated the price pain for Bitcoin investors by selling mined. He outlined his point in a series of Twitter posts:
NEVER gone into a halvening in BEARISH price action, miners already capitulating adding sell volume. Historically we front run with a BULLISH setup, miner capitulating only after halvening when revenues are slashed. This is a unique setup. Quite bearish leading up to the event. pic.twitter.com/20748Zv8aQ
- Willy Woo (@woonomic) November 18, 2019
Should I expect more from bitcoin halving?
Halving next year ("The Cut") is the next big thing on the bitcoin calendar. Analysts attribute this to the rise in the price of Bitcoin this year. But that could be a mistake. In a tweet, Wu said that Bitcoin's price action will not repeat itself in recent months, and as such, the price of crypto will remain bearish in the short term.
Zenith's Berenzon said the correlation between Bitcoin price action and traders' expectations is "an interesting game theory question" where one follows from the other. “This expectation [of a post-halving price increase] alone will push the price up [before the actual event],” he said. “If you look at the data, it shows that the biggest increase happened 12 months after the Halving fact.”
In other words, expect more pain ahead.