Bitcoin and cryptocurrencies across the board sold off hard today, why?
Like in most cases, there usually isn't one concrete reason why bitcoin sold off today.
Usually there is some piece of news that served as a catalyst or better yet, an excuse, for short sellers to hit the sell button and drive prices lower.
And sometimes all they need is an excuse...
In my opinion, there were likely a couple excuses provided to them yesterday.
(Source: https://sputniknews.com/us/201810101068772664-dow-sinks-800-points-as-tech-stocks-slide/)
The first likely culprit comes in the form of the US stock market.
Yesterday, major US stock markets took it on the chin in a major way, with the Dow down close to 900 points on the day.
That marked the largest single day loss since February of this year.
Contrary to what some people might think, that turned out not to be good news for bitcoin either.
It appears as stocks sold off, that selling also spilled over into cryptocurrencies.
While bitcoin and crypto are seen as a non-correlated asset, they are not an inversely related asset.
Meaning that when stocks sell off, that doesn't mean bitcoin should go up.
In fact, history shows that really hasn't been the case at all, though some would like to believe it is.
Bitcoin caught in the crossfire...
Higher interest rates typically bring on tighter financial conditions which could dampen growth going forward and equity markets are reacting to that.
I would venture to say that bitcoin represents one of the more risky investments out there. Which means that when risky assets are selling off like they were yesterday due to fears over rising interest rates, bitcoin likely gets included in the selling.
In recent history, when things start going bad for the stock market, it has spilled over into everything else, except for the dollar.
The dollar has been most investors' go to safe haven when there is uncertainty in the world.
Conversely, when times are good and money is flowing into financial markets, some of that tends to find its way into the riskiest of assets, which would include cryptocurrenices.
In my opinion this was likely the main reason for the drop in cryptocurrency prices yesterday.
(Source: http://bestgpuformining.com/cryptocurrency-future-says-christine-lagarde-imf/)
What else could it have been?
Another possible cause for the selling could have been the news released from the IMF.
They didn't have very kind things to say about bitcoin and cryptocurrencies and said that crypto assets in genearl may help contribute to the next financial crash:
"Continued rapid growth of crypto assets could create new vulnerabilities in the international financial system."
(Source: https://www.cnbc.com/2018/10/11/bitcoin-price-nearly13-billion-wiped-off-cryptocurrency-market.html)
Seems unlikely to me when there are very few large funds in crypto and we are talking about a $200 billion dollar total market, though I guess there is still a small chance if things were to keep growing.
My opinion, this wasn't the main reason for the selling.
My guess is that the same high frequency trading algos that helped drive prices down in equities yesterday were turned on in the crypto markets as well shortly after stock markets closed.
Sell first, ask questions later.
Stay informed my friends.
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