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When even a Bitcoin price drop of more than 22% is met with a collective shrug, you know this new asset class is truly like no other.
Last week, the Bitcoin price plunged from about $10,050 to $7,828 in just five days. And while Bitcoin owners weren't happy about it, no one was panicking.
Imagine if the same thing had happened in the U.S. stock markets. A 22.1%, one-week drop would chop 6,000 points off the Dow Jones Industrial Average. The talking heads would lose their minds.
Drops like this cause panic among stock traders. The biggest two-day percentage drop in the history of the DJIA was 24.55% on Oct. 28 and 29, 1929. That most famous of market crashes launched the Great Depression.
But for Bitcoin, which has been particularly volatile of late, such a plunge fazes no one. The brief 10-year history of Bitcoin is packed with wild, often extreme price swings.
Bitcoin owners don't let these swings bother them - not even the "crashes" - because over time, the price of Bitcoin has gone up dramatically. Remarkably, Bitcoin has endured several declines in excess of 80%, but each has been followed (eventually) by a rally that takes the price many times beyond the previous all-time high.
Now It's Your Turn: Many who bought Bitcoin in 2010 are now set for life. Today, cannabis stocks offer a chance for you to build a similar fortune - if you know which ones to buy. These 3 stocks could bankroll your early retirement...
Compared to those declines, 22% is a hiccup.
This most recent plunge was also predicted by several of Bitcoin's technical analysts. Back in August, the "Markets Daily" e-letter produced by Coindesk warned repeatedly of a correction that could take the price of Bitcoin as low as $7,500.
All that said, it's important to know why Bitcoin fell 22% in such a short span.
As is often the case with these sharp price swings, I suspect there was more than one trigger.
Let's have a look at the most likely culprits...
Why the Bitcoin Price Plunged 22%
In no particular order:
- Bakkt Launch: The Bakkt exchange, owned by the Intercontinental Exchange (ICE, which also owns the New York Stock Exchange) started trading physically settled Bitcoin futures Monday, Sept. 23. But volumes were lower than expected. Some surmised the lack of demand sparked the Bitcoin sell-off.
- Technical Reasons: The technical analysts viewed $9,000 as a key support level. When that was broken, the Bitcoin price kept tumbling.
- Whale Trade: A post on Bitcoin subreddit showed evidence of the transfer and sale of $1.2 billion worth of Bitcoin within a one-hour period on Tuesday. A sale of that much Bitcoin in such a brief period would have accelerated a decline if it wasn't the actual trigger.
- Trump Impeachment: The rush to start impeachment proceedings of U.S. President Donald Trump may have had a negative impact on the price of Bitcoin as well. Trump has continued to push the Federal Reserve to keep lowering interest rates. Lower rates weaken the U.S. dollar, which should push the Bitcoin price up. The Fed may be less likely to lower rates if Trump were removed from office.
Whatever the cause(s), the focus now needs to be on what comes next. Is the Bitcoin price setting up to drop further? Or will it rally from here?
I have several thoughts on this - and they may come as a surprise...
My Bitcoin Price Predictions
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.