Bitcoin Losses $3,000 in Less than a Day at the Same Time Coinbase Goes Down
For several weeks now, Bitcoin had been gaining steam and its price has been increasing rapidly. Last year ended with a lot of uncertainty about the future of the world’s most prominent digital asset, as it began a slide in mid-November that took its value from the $6,000s to the low $3,000s in less than a few weeks.
However, the market showed a sustained recovery since the middle of March 2019, the moment in which it passed the $4,000 threshold for good. From that point on, its price began to increase until it passed $13,000 on Wednesday, June 26th.
A Severe Outage
But from Wednesday to Thursday, the digital asset endured another sizable drop, one that it had not suffered in months: from more than $13,000, it went to as low as $10,373.75 on June 27th, which equals to a drop of approximately $3,000. Perhaps not coincidentally, the fall began at the same time that Coinbase, one of the primary cryptocurrency exchanges in the planet, suffered an outage.
Analysts say that people were reminded of Bitcoin’s volatility factor by seeing Coinbase go down for a few hours, and that was one of the main driving factors for the brief price drop. Overall, the year is still successful for Bitcoin, as it is up more than 200% in 2019, but the events of Thursday were unexpected.
Before the price drop, the cryptocurrency was enjoying quite the honeymoon, with the value being at a 17-month high on Wednesday: $13,485.85. CNBC quoted a Coinbase spokesperson, who opted to remain anonymous, that said the platform was down “for a short period of time due to high volume.”
Leverage: One of the Causes
Michael Moro, who is the CEO of Genesis Global Trading, told CNBC that “even the most optimistic crypto bulls would tell you that a 50%+ move in a week is too much too fast,” identifying leverage as the “key driver” to the drop off.
“The presence of leverage exacerbates the moves in both directions and affects the speed dramatically,” Moro told CNBC. “Of course bitcoin has a history of doing this (both upward and downward), but it is hard to call the magnitude of the move healthy.”
Leverage was in the thoughts of known crypto personality Brian Kelly, the CEO and Founder of BKCM. He said that as the prices rose, so did borrowing costs; making it more expensive to bet on the cryptocurrency to keep growing in value.
At the moment of writing this piece, BTC was exchanging hands at $11,032.33.
Libra as a Catalyst for Bitcoin Success
It is no secret to anybody that the announcement of the Libra cryptocurrency, with Facebook behind it, has been greeted with lots of space over the Internet and media. BTC has rallied almost 30% since the world’s biggest social network revealed its new project, raising awareness about digital assets and more interest from institutional investors.
“The noise over Facebook’s coming plan to launch a digital cryptocurrency, discussed here last week, must have helped to revive interest in Bitcoin,” according to Jefferies, Analyst Christopher Wood.
Meanwhile, Michael Novogratz, CEO Galaxy Digital Holdings, also stated that Facebook was a catalyst for bitcoin surpassing the $10,000 threshold. “One of the largest companies in the world said we believe in cryptocurrencies. If you’re an institutional investor who’s getting close and still worried about investing, it makes you that much more confident.”
By Andres Chavez