Cryptocurrencies are notoriously volatile, but even seasoned traders were taken aback by the price action on Wednesday and Thursday.
Bitcoin is down roughly 15% compared to the day before and is trading at $5,380 on Coinbase at writing time. Ethereum fared even worse, dropping roughly 17% to $171 and losing the position of the second largest coin by market cap to Ripple, which is also down more than 10% in the last 24 hours.
We’ve seen sharp price drops like these before, but this selloff is notable for several reasons. For one, it came after nearly three months of relative stability in the crypto market; some even pointed out that Bitcoin has become more stable than some of the stocks listed on Nasdaq.
And while the prices showed signs of modest recovery in early Thursday trading, the depths that they’ve reached aren’t very promising for the crypto market’s future. Bitcoin has recently been trading at roughly one third of its December all-time-high price of $19,789, but (except for a very short period in June) it steadfastly refused to go below $6,000 all year, which established that price as an important resistance level. The fact that that level’s now broken indicates the bear market will continue.
The reasons behind Wednesday’s crash aren’t easy to discern. The Bitcoin Cash power struggle and the uncertainty it brings, was a factor. But it was more likely just a catalyst for a market that needed a reason for a correction. On a broad level, Bitcoin’s adoption as a means of payment has been glacially slow, and Ethereum’s promise to become a world computer has been hampered by scalability issues, which probably won’t get solved very soon.