Bitcoin prices dropped significantly today, falling below $5,400 and reaching their lowest since late last year.
The digital currency declined to as little as $5,390.12, losing more than 10% in the space of 24 hours and hitting a fresh 2018 low, CoinDesk price data reveals.
This downward movement took place as the broader cryptocurrency market also suffered notable losses, declining from a total value of $210 billion earlier in the day to almost $180 billion by roughly 15:30 UTC (approximately 10:30 a.m. ET), according to CoinMarketCap.
When explaining what caused the sharp decline in bitcoin prices, analysts generally pointed to either technical analysis or the uncertainty surrounding the upcoming hard fork in bitcoin cash.
Bitcoin Cash Hard Fork FUD
Several analysts emphasized the uncertainty surrounding the hard fork that is scheduled to take place in bitcoin cash, currently the fourth-largest digital currency by market capitalization on CoinMarketCap.
Craig Wright and Roger Ver, both major proponents of bitcoin cash, have begun advocating for two different versions of the digital currency.
“The end result will most likely be a split in the network resulting in two different versions of Bitcoin Cash when both upgrades go into effect this Thursday,” Mati Greenspan, senior market analyst at social trading platform eToro, told Business Insider.
“There is a tremendous amount of FUD surrounding the Bitcoin Cash hard fork,” said Joshua Frank, co-founder of cryptocurrency analytics platform TheTIE.io.
“It seems like there is a lot of confusion in the market as to what is driving price and who will emerge as the winner in the BCHABC vs. BCHSV fight,” he added. Frank stated:
We have seen this FUD and confusion in Twitter conversations. This is reflected by the fact that Bitcoin Cash has had sentiment volatility three times higher than any other major cryptocurrency over the last 24 hours and BCH’s tweet volume is 217% higher than its 20 day moving average.
With the uncertainty expressed by crypto traders on Twitter, both the short and long-term sentiment of Bitcoin Cash remain negative. It will be interesting to see how the sentiment of BCHABC vs. BCHSV as well as miner adoption play out over the next 48 hours. We anticipate this having a strong impact on future price movement.
While Frank emphasized sentiment, other analysts pointed to market factors when explaining bitcoin’s recent sharp drop.
“As far as I can tell this move is more technical in nature,” said Greenspan.
Eric Ervin, CEO of Blockforce Capital, offered a similar perspective, stating that “the recent price plunge is a cause of purely technical moves.”
“The significance of the $6,000 support level shouldn’t be understated. As the bear market has trudged along these past few months, that level has held steady,” he noted.
As a result, “many investors have come to see it as a stop-loss measure. This would explain the large amount of liquidations that have occurred.”
“Looking forward, today’s price drop may be a blessing for the asset as it could help push the market to a bottom, after which it can bounce back,” added Ervin.
While some analysts chose to emphasize either the uncertainty surrounding the bitcoin cash hard fork or instead technical analysis, others asserted that the market’s price movements were the result of both.
Tim Enneking, managing director of Digital Capital Management, was in this camp.
“The markets have been incredibly soft and the BCH fork simply provided the catalyst for a drop that’s been waiting to happen for a while now,” he said.
Joe DiPasquale, CEO of cryptocurrency fund of hedge funds BitBull Capital, provided a similar point of view.
“Today’s sharp drop in Bitcoin price is a result of both the Bitcoin Cash dispute (the upcoming fork) and the increasing pressure on the $6K price point.”
He noted that “Over the last several months, that price point has been repeatedly tested, and bounced back above it but to lower and lower highs.”
“While many were seeing the rebuffing of the $6K price point as support, at BitBull we argued that the more the $6K price point is tested, the more likely it was to break.”
DiPasquale emphasized that as market participants aim to spread FUD, it provides a catalyst for sell-offs.
As a result, many traders may simply “adopt a wait and see” approach until things calm down, he concluded.