Bitcoin reached a low of $550 last night, down by more than one hundred dollars from $680 for the third day in a row. The unexpected crash coincides with the end of the first Australian Bitcoin Auction which closed around the same time as bitcoin’s price movement.
24,500 bitcoins, valued at $19 million prior to the crash, were sold in a 48 hours sealed-bid auction in 11 lots of 2,000 bitcoins and one lot of 2,518 bitcoins. The auction ended at 12.01 am on the 22nd of June 2016, just as price moved sharply.
It is not currently known who participated or how many individuals/companies took part and the winning bid is unlikely to be disclosed unless the winner comes forward. We are awaiting a response from the auctioneer to provide further details.
Reasons for the sharp fall in Bitcoin’s price
Last night’s price movement is similar to previous bitcoin auctions which have followed a general pattern of price increase followed by a sharp downwards price decrease once the auction ends.
One obvious reason for this general pattern may be that demand is taken out of the market in one huge sale with another potential reason being arbitrage as bidders may try to buy low and sell high.
Some, however, suggest that there may be other reasons for the sharp fall in bitcoin’s price.
Charles Hayter, CEO of CryptoCompare, states:
“The downtrend can be put down to profit taking, mild panic on the Chinese markets and potentially an element reassurance in the Brexit polls as remain looks likely to win.”
Bitcoin has fallen more than $200 from a high of $780 to a low of $550 before slightly recovering to $600 in sharp and unexpected movements, bringing back volatility as the halving approaches.
A market freeze at bitfinex three days ago sent price crashing down to $700, losing $80 in minutes to only repeat it the next day, losing again almost $100, before slightly recovering to $650. Last night’s movement repeated the $100 loss once more, down to $550, before recovering to $600 as of publishing.
These price movements follow a stratospheric rise of $300 in just days to $780 from $450. It is not clear whether price will now continue its leg up towards all-time high, or reverse back towards 400s.
Brexit and halving factors
Today’s historical Brexit results may affect the direction, especially if United Kingdom caves in to the rising nationalistic feelings across the free world.
A Brexit result is likely to send shockwaves across the market according to almost all financial bodies, potentially encouraging a flight to safety, with bitcoin one option alongside gold. In contrast, a remain result may bring back certainty and thus encourage more risk taking and investment in dividend paying assets.
Polls are surprisingly close, 47% for remain and 45% for leave with some still undecided. We are unlikely, therefore, to have any indication until tomorrow.
Another factor may be the halving which is now only days away. This may push price upwards, but is balanced by uncertainty. Some miners have suggested they are fully prepared and have buffers, but some have declared bankruptcy.
Bitcoin’s next movement, therefore, is not clear, but what we can say for certain is that price may go down just as well as up. Readers therefore are urged to only trade/invest what you can afford to lose, especially now that volatility is back with sharp price movements.