The Bitcoin price has fallen from $10,500 to $7,600 in less than a month, with many explanations given as to why. We examine the four most plausible and offer our opinion on which is the most likely, and why good news could be just round the corner for Bitcoin bulls.
Bitcoin is known for its double-digit corrections, and there are those who believe this is just another of these. Looking at the three-year chart we can see that this is far from impossible, as every peak is followed by a trough, and so this could simply be the continued correction from the local highs of $10,500 earlier in the year.
Bitcoin experienced 50% corrections on its way to $20,000 in 2017, so is this really anything different?
Coronavirus-induced Market Selloff
The coronavirus has caused panic selling in every major market, so is Bitcoin simply following the trend? This one is a little harder to pin down, as prior to this week’s collapse we saw Bitcoin rise while all other markets were falling, with Bitcoin this week matching the wider markets.
Bitcoin is likely to fare badly during an all-out recession due to its inherently risk-on nature, but is it already starting to show signs of weakness as the potential for a global financial crisis comes closer?
The PlusToken scam raked in ₿200,000 during its years of operation, which the operators have been selling off since at least August last year. The scammers moved ₿13,000 worth $123.5 million into Bitcoin mixers just days before Bitcoin’s collapse, which in theory would serve no purpose other than to prepare it for sale.
Previous selloffs have been linked to PlusToken sales, so could it be the case that this latest flash crash is a direct response to yet more selling?
Whale Manipulation Pre-halving
Everyone in Bitcoin knows about the halving narrative, and particularly what happens in the months afterwards. Because of this, there is a theory that whales are taking advantage of the worldwide market unrest to push the price of Bitcoin down in a last gasp effort to grab some more before the rocket ship takes off in May.
If they were planning to do so at all, now would be the perfect time, and it would be far from the first time that the Bitcoin price had been manipulated to suit the large holders.
Our Opinion – PlusToken Mostly to Blame
In our opinion, the key reason for Bitcoin’s collapse this week is largely down to PlusToken disposing of more tokens. We warned in February that a proper bull run couldn’t get underway until PlusToken had got rid of all their tokens, and this seems to be playing out.
So why are the PlusToken holders selling now? The chances are that they were worried about the impact that coronavirus is having on the markets and wanted to cash out now rather than risk Bitcoin dropping before they have had a chance to sell. Ironically of course this was a self-fulfilling prophecy, in that they themselves crashed the market, but from their point of view they got out before it could get worse.
Now for the Good News
No one knows exactly how much crypto remains under PlusToken’s control, although in February Chainalysis estimated that they had “at least” ₿20,000 left to liquidate. Assuming they sold most if not all of the ₿13,000 they shipped off last week, this could mean that they are almost done, and that following one more potential selloff we could finally be rid of the PlusToken menace for good.