This week definitely started slow, but as Tuesday hit cryptocurrency markets began spiraling down at an accelerating rate. As we speak, most cryptocurrencies are down at least 10% and dropping, with some coins like Bitcoin SV taking a near 30% hit. Let’s try and make sense of this bearish market movement and see if we can figure out the cause for the panic.
Binance BTC/BUSD Flash Crash?
The first suspect for the cause of this major drop is Binance. It seems that due to low liquidity on the market, the BTC/BUSD pair flash crashed to as low as $1800.00 earlier today. The trading pair has since recovered and Binance has yet to make a statement in regards to the incident.
What the flash crash means, is that someone was able to buy Bitcoins at an astonishingly low rate. However, this can’t be the sole cause for the downtrend because the amount of Bitcoins bought during the flash crash is roughly 20 BTC. While this flash crash could still have some impact on the recent correction, but in my opinion it isn’t significant enough.
SEC Ripple Lawsuit?
The other major drama surrounding cryptocurrency is the SEC lawsuit against Ripple Labs. The lawsuit alleges that Ripple violated securities rules by selling XRP. Ripple has since filed a motion to dismiss the lawsuit, citing that the SEC already determined that XRP wasn’t a security and the lawsuit was brought on too late. You can read the full 23 page motion here.
The motion was filed September 19th, and while the whole lawsuit is sure to bring bearish pressure to XRP, the SEC already determined that Bitcoin and Ethereum are not securities. As a result, there’s no way that this lawsuit is the cause for the massive correction.
Almost Half of Bitcoin’s Hashpower Disappears
This bring me to my last point. 40% of Bitcoin’s hashpower has mysteriously disappeared within the past 24 hours. As Max Keiser puts it best: “Price follows hashrate.“
If 40% of BTC’s hashrate suddenly disappears, that’s quite a significant drop that is sure to cause panic in the BTC market. Moreover, since most cryptocurrency are still heavily affected by Bitcoin’s price fluctuations, that’s sure to cause panic for the rest of the crypto market.
And that’s why I believe that the recent cryptocurrency market correction is due to the mysterious drop in Bitcoin’s hashpower. Not only does it make the network much less secure, but it also opens up the possibility for a 51% attack. We can only hope that Bitcoin’s hashpower returns once again. If it does not, I wouldn’t be surprised if Bitcoin drops to as low as $5,000.
Do you think the recent correction is due to Bitcoin’s hashpower loss? If not, what do you think the real reason is?