Bitcoin drops in price

Why Do We Get Extreme Bitcoin Price Drops?

Bitcoin’s price often drops quickly and seemingly for no reason — what are some possible causes for the top crypto’s flutuations?

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The price of Bitcoin has been on a seemingly unstoppable ascent since November 2020, to reach the promised land (and all-time high) of $20,000 this month. Buoyed by increasing institutional interest after PayPal’s foray in crypto custodianship, tightening supply thanks to the Bitcoin halving mining reduction and the weakening U.S. dollar, Bitcoin’s 2020 bull run, while sharing a similar time frame to its 2017 predecessor, has seemed markedly different and more determined.

Yet, days before it recovered to a new peak in December 2020, shocked investors witnessed a sharp price drop from Nov. 25 to 27. From a drive towards the $19,000 range, it went skidding down to the $16,000-level within hours. In a mere two days, it shed $3,000 in value and revived a sobering case of deja vu in more seasoned crypto investors used to the periodic oscillation between “fear of missing out” (FOMO) and “fear, uncertainty and doubt” (FUD) that separates the weak investor hands from the strong,В

The November crash was attributed to rumored legislation that would target crypto wallets before the end of Trump’s term. However, surely this couldn’t be the sole reason for such a strong reversal, after Bitcoin brushed off the BitMEX prosecutions with barely a hiccup only weeks earlier. With a lion’s share of crypto’s total market cap, BTC shouldn’t be as volatile as other less established cryptocurrencies who frequently experience so-called pump and dumps due to low liquidity.В

This begs the question: how much of Bitcoin price movement can be attributed to legitimate market forces, and is there an invisible dark hand involved? What gives, Bitcoin?

Why Do We Get Extreme Price Drops in Crypto?

It goes without saying that there are many factors affecting the rise and fall of Bitcoin’s price, the first digital currency of its kind, which derives its price from a fixed, deflationary supply and fluctuating and cyclical demand. The reasons touted above were undoubtedly driving factors that led to the rise of the digital asset. But what are the factors that caused the drop?

While there is no clear industry consensus on the reasons, there are plenty of suspects to consider during Bitcoin’s latest (brief) fall from grace.В

Bitcoin Whales

According to CryptoQuant CEO Ki-Young Ju, the reason for the drop can be partly attributed to crypto whales who began to deposit large volumes of their Bitcoin holdings to exchanges in order to cash in on BTC’s record highs. This is similar to what happened with Bitcoin back in the 2017 bull run, when whales contributed to a major shift in the cryptocurrency’s value just by moving their assets to other platforms.

The blockchain analytics firm IntoTheBlock showed that from Nov. 25 to 26, Bitcoin whales unloaded 93,630 BTC in different exchanges. This totaled to over $1.6 billion worth of BTC.

Another report noted that the movement of Bitcoins out of OKEx also played a role in this scenario as well. OKEx users were disgruntled with the platform after withdrawals were forbidden for weeks after Chinese authorities allegedly arrested one of its key holders. This resulted in an outflow of around 29,300 BTC from the platform, which was worth $500 million.

CryptoQuant’s data also shows that even the amount of Tether (USDT) held in OKEx wallets had dropped by 97.6% within just a week. What this reflects is that users began transferring their assets to a different exchange or their own cold wallets.

CryptoQuant CEO Ki Young Jo emphasized that on-chain indicators continue to reflect a strong buying pressure. This means that the bull market is not ready to end anytime soon. However, he also noted that when the whales are active on exchanges, the likelihood of Bitcoin’s price going sideways or down is also high. Here, Jo noted that there is a danger zone for BTC that users have to be wary about whenever they plan to hold new positions.

A ‘Healthy Pullback’

Then again, many believe that the price drop was to be expected, and is in fact a good thing that’s allowing Bitcoin to let out a bit of steam before it ascends dramatic new heights — especially since the its price trend is still similar to the pullbacks before that ranged around 20% in other recorded bull runs in Bitcoin history.

Derivatives Trading

The drop has been accompanied by a massive liquidation of multiple derivative positions, amounting to almost $2 billion. This led to “market overheating,” which is seen from the futures market being overleveraged.В

Basically, this meant that the value of perpetual contracts has become much greater than the value of Bitcoin and its underlying equity. Much of Bitcoin trading is so complex and interwoven with sophisticated trading and institutional products, such as futures, leveraged margin trades (exceeding 100x on some exchanges) and decentralized finance (DeFI) protocols — a sudden slide in Bitcoin’s price can set off a chain reaction of automated responses executed by trading bots within milliseconds, leading to an abrupt oversupply of BTC and a further steep drop in price.В

According to cryptocurrency analyst Joseph Young, when the funding rate fell to 0.011%, it reflected the fact that Bitcoin perpetuals were oversold following the deep price drop of around $3,000. This supports the claim of other analysts that there was, indeed, too much leverage in the market. Young adds, however, that the price of Bitcoin remained resilient at $18,000 despite the overselling.

Regulatory Uncertainty

United States regulators have always had a dysfunctional love-hate relationship with Bitcoin. There are rumors circulating that the U.S. Treasury Department is planning to implement a mechanism where they will become empowered to monitor the crypto-wallets of users. It didn’t help that Brian Armstrong, CEO of Coinbase, publicly tweeted his concern, triggering a flood of sell-offs.В

Investor Caution

Don’t underestimate the impact of the average trader either. There are certainly a large group of battle-hardened Bitcoin investors and HODLers who still carry the scars of 2018’s “Crypto Winter” and who have waited patiently to recoup their losses or have a second chance at redemption — that is, to sell their BTC at record high prices.В

Until Bitcoin crosses the promised land that lies yonder between those two stacks of high society, it’s still anybody’s game, and savvy investors know this. As a result, when the price dips sharply, nerves get frayed and sell buttons get pushed. While many Bitcoin holders may propagate the unstoppable rise of the currency and predict near-future highs totaling hundreds of thousands of dollars, in private they might not be quite so optimistic. As the saying goes, buy the rumor, sell the news.В

When Will the Next Price Drop Come?

Predicting when the bull run for Bitcoin will end is still tricky. With so many external variables in the world at present, such as the rampant pandemic, the U.S. presidential handover and the dangerous potential regulatory fallout, it is nearly impossible to determine the next steps of crypto whales and how the existing positions in the market are going to move. Until clear regulation also stops blatant market manipulation behavior, we’ll have to accept that anything can happen to the price of Bitcoin.В

Before we decide to hold new positions or exit existing ones, it is very important to understand that there are many stakeholders in the market and that they each play a significant role in the movement of BTC prices. Don’t be easily swayed by FOMO or FUD, do your research and act accordingly.В

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Bitcoin Suffers Steepest Drop in 10 Days as US Monetary Policy Causes ‘Short-Term Jitters’

Bitcoin continues its descent amid whispers of U.S. Federal Reserve tapering economic stimulus and China’s ongoing pressure on crypto miners.

Sebastian Sinclair

Bitcoin Suffers Steepest Drop in 10 Days as US Monetary Policy Causes ‘Short-Term Jitters’

Bitcoin’s price has fallen to its lowest point in over a week as traders stare down prospects of shifting U.S. monetary policy and continued tightening of regulation of cryptocurrencies in China.

At 20:00 UTC on Monday, the price of the world’s foremost crypto began declining from around $35,466 to a low of $33,221. Prices were up slightly on the hour, and one bitcoin was changing hands for roughly $33,793 at the time of publication.

The move marked the largest single daily loss for the bulls after dropping 6.2%, the most since May 28, amid sell pressure egged on by fading bullish investor sentiment.

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Some are pointing toward the ongoing pressure from mainland China on crypto mining operations and trading, where Weibo accounts from key opinion leaders in crypto have been blocked.

“China continues to pressure crypto with rolling mining bans wiping out its most popular social media platform, Weibo, clean of crypto influencer accounts,” said Jehan Chu, managing partner at Hong Kong-based crypto investment firm Kenetic Capital. “This signals a tightening noose around crypto on the mainland.”

Markets worldwide have also been trading on shaky ground as investors eye the possibility the U.S. Federal Reserve could begin to unwind from its liquidity-boosting quantitative easing program. Though some, including $7.5 billion hedge fund Skybridge Capital, whose bitcoin holdings exceed $310 million, say tapering of U.S. monetary policy is unlikely to affect crypto and gold, arguing those asset classes possess resilience.

Meanwhile, Deutsche Bank, Germany’s largest lender, has said the U.S. could be in for one of its worst inflationary periods in history, with government spending and loose monetary policy likely catalysts for creating conditions last seen in the 1940s and 1970s.

“While long-term fundamentals remain intact, U.S. monetary and macroeconomic policy are causing short-term jitters,” Chu said. Indeed, investors have been offloading some of their investments in hopes of entering at lower points as U.S. monetary and fiscal policy grows clearer, the managing partner said.

Other notable cryptos were also trading in the red, with the top 10 by market capitalization having fallen between 7.3% and 12.9% over the previous 24 hours. Polkadot and XRP were the hardest hit, down 12.93% and 11.39%, respectively.

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BTC Price Live Data

The live Bitcoin price today is $37,171.71 USD with a 24-hour trading volume of $43,492,003,526 USD. Bitcoin is up 0.97% in the last 24 hours. The current CoinMarketCap ranking is #1, with a live market cap of $696,302,760,650 USD. It has a circulating supply of 18,732,062 BTC coins and a max. supply of 21,000,000 BTC coins.

If you would like to know where to buy Bitcoin , the top exchanges for trading in Bitcoin are currently Binance, Huobi Global, OKEx, ZG.com, and Bybit. You can find others listed on our crypto exchanges page.

What Is Bitcoin (BTC)?

Bitcoin is a decentralized cryptocurrency originally described in a 2008 whitepaper by a person, or group of people, using the alias Satoshi Nakamoto. It was launched soon after, in January 2009.

Bitcoin is a peer-to-peer online currency, meaning that all transactions happen directly between equal, independent network participants, without the need for any intermediary to permit or facilitate them. Bitcoin was created, according to Nakamoto’s own words, to allow “online payments to be sent directly from one party to another without going through a financial institution.”

Some concepts for a similar type of a decentralized electronic currency precede BTC, but Bitcoin holds the distinction of being the first-ever cryptocurrency to come into actual use.

Who Are the Founders of Bitcoin?

Bitcoin’s original inventor is known under a pseudonym, Satoshi Nakamoto. As of 2020, the true identity of the person — or organization — that is behind the alias remains unknown.

On October 31, 2008, Nakamoto published Bitcoin’s whitepaper, which described in detail how a peer-to-peer, online currency could be implemented. They proposed to use a decentralized ledger of transactions packaged in batches (called “blocks”) and secured by cryptographic algorithms — the whole system would later be dubbed “blockchain.”

Just two months later, on January 3, 2009, Nakamoto mined the first block on the Bitcoin network, known as the genesis block, thus launching the world’s first cryptocurrency.

However, while Nakamoto was the original inventor of Bitcoin, as well as the author of its very first implementation, over the years a large number of people have contributed to improving the cryptocurrency’s software by patching vulnerabilities and adding new features.

Bitcoin’s source code repository on GitHub lists more than 750 contributors, with some of the key ones being Wladimir J. van der Laan, Marco Falke, Pieter Wuille, Gavin Andresen, Jonas Schnelli and others.

What Makes Bitcoin Unique?

Bitcoin’s most unique advantage comes from the fact that it was the very first cryptocurrency to appear on the market.

It has managed to create a global community and give birth to an entirely new industry of millions of enthusiasts who create, invest in, trade and use Bitcoin and other cryptocurrencies in their everyday lives. The emergence of the first cryptocurrency has created a conceptual and technological basis that subsequently inspired the development of thousands of competing projects.

The entire cryptocurrency market — now worth more than $300 billion — is based on the idea realized by Bitcoin: money that can be sent and received by anyone, anywhere in the world without reliance on trusted intermediaries, such as banks and financial services companies.

Thanks to its pioneering nature, BTC remains at the top of this energetic market after over a decade of existence. Even after Bitcoin has lost its undisputed dominance, it remains the largest cryptocurrency, with a market capitalization that fluctuated between $100-$200 billion in 2020, owing in large part to the ubiquitousness of platforms that provide use-cases for BTC: wallets, exchanges, payment services, online games and more.

Related Pages:

Looking for market and blockchain data for BTC? Visit our block explorer.

Want to buy Bitcoin? Use CoinMarketCap’s guide.

How Much Bitcoin Is in Circulation?

Bitcoin’s total supply is limited by its software and will never exceed 21,000,000 coins. New coins are created during the process known as “mining”: as transactions are relayed across the network, they get picked up by miners and packaged into blocks, which are in turn protected by complex cryptographic calculations.

As compensation for spending their computational resources, the miners receive rewards for every block that they successfully add to the blockchain. At the moment of Bitcoin’s launch, the reward was 50 bitcoins per block: this number gets halved with every 210,000 new blocks mined — which takes the network roughly four years. As of 2020, the block reward has been halved three times and comprises 6.25 bitcoins.

Bitcoin has not been premined, meaning that no coins have been mined and/or distributed between the founders before it became available to the public. However, during the first few years of BTC’s existence, the competition between miners was relatively low, allowing the earliest network participants to accumulate significant amounts of coins via regular mining: Satoshi Nakamoto alone is believed to own over a million Bitcoin.

Mining Bitcoins can be very profitable for miners, depending on the current hash rate and the price of Bitcoin. While the process of mining Bitcoins is complex, we discuss how long it takes to mine one Bitcoin on CMC Alexandria — as we wrote above, mining Bitcoin is best understood as how long it takes to mine one block, as opposed to one Bitcoin.

How Is the Bitcoin Network Secured?

Bitcoin is secured with the SHA-256 algorithm, which belongs to the SHA-2 family of hashing algorithms, which is also used by its fork Bitcoin Cash (BCH), as well as several other cryptocurrencies.

What Is Bitcoin’s Role as a Store of Value?

Bitcoin is the first decentralized, peer-to-peer digital currency. One of its most important functions is that it is used as a decentralized store of value. In other words, it provides for ownership rights as a physical asset or as a unit of account. However, the latter store-of-value function has been debated. Many crypto enthusiasts and economists believe that high-scale adoption of the top currency will lead us to a new modern financial world where transaction amounts will be denominated in smaller units.

The top crypto is considered a store of value, like gold, for many — rather than a currency. This idea of the first cryptocurrency as a store of value, instead of a payment method, means that many people buy the crypto and hold onto it long-term (or HODL) rather than spending it on items like you would typically spend a dollar — treating it as digital gold.

Crypto Wallets

The most popular wallets for cryptocurrency include both hot and cold wallets. Cryptocurrency wallets vary from hot wallets and cold wallets. Hot wallets are able to be connected to the web, while cold wallets are used for keeping large amounts of coins outside of the internet.

Some of the top crypto cold wallets are Trezor, Ledger and CoolBitX. Some of the top crypto hot wallets include Exodus, Electrum and Mycelium.

How Is Bitcoin’s Technology Upgraded?

A hard fork is a radical change to the protocol that makes previously invalid blocks/transactions valid, and therefore requires all users to upgrade. For example, if users A and B are disagreeing on whether an incoming transaction is valid, a hard fork could make the transaction valid to users A and B, but not to user C.

A hard fork is a protocol upgrade that is not backward compatible. This means every node (computer connected to the Bitcoin network using a client that performs the task of validating and relaying transactions) needs to upgrade before the new blockchain with the hard fork activates and rejects any blocks or transactions from the old blockchain. The old blockchain will continue to exist and will continue to accept transactions, although it may be incompatible with other newer Bitcoin clients.

A soft fork is a change to the Bitcoin protocol wherein only previously valid blocks/transactions are made invalid. Since old nodes will recognise the new blocks as valid, a soft fork is backward-compatible. This kind of fork requires only a majority of the miners upgrading to enforce the new rules.

Some examples of prominent cryptocurrencies that have undergone hard forks are the following: Bitcoin’s hard fork that resulted in Bitcoin Cash, Ethereum’s hard fork that resulted in Ethereum Classic.

https://coinmarketcap.com/alexandria/article/bitcoin-vs-bitcoin-cash-vs-bitcoin-svBitcoin Cash has been hard forked since its original forking, with the creation of Bitcoin SV.

What Is the Lightning Network?

The Lightning Network is an off-chain, layered payment protocol that operates bidirectional payment channels which allows instantaneous transfer with instant reconciliation. It enables private, high volume and trustless transactions between any two parties. The Lightning Network scales transaction capacity without incurring the costs associated with transactions and interventions on the underlying blockchain.

How Much Is Bitcoin?

The current valuation of Bitcoin is constantly moving, all day every day. It is a truly global asset. From a start of under one cent per coin, BTC has risen in price by thousands of percent to the numbers you see above. The prices of all cryptocurrencies are quite volatile, meaning that anyone’s understanding of how much is Bitcoin will change by the minute. However, there are times when different countries and exchanges show different prices and understanding how much is Bitcoin will be a function of a person’s location.

Where Can You Buy Bitcoin (BTC)?

Bitcoin is, in many regards, almost synonymous with cryptocurrency, which means that you can buy Bitcoin on virtually every crypto exchange — both for fiat money and other cryptocurrencies. Some of the main markets where BTC trading is available are:

If you are new to crypto, use CoinMarketCap’s own easy guide to buying Bitcoin.

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