Bitcoin suffered one of its worst weeks in 2018, dropping down below $5,000 for the first time this year. On Wednesday last week, the cryptocurrency was trading near $6,300, while only a day later a big sell-off hit the market that continued right until yesterday. Luckily, things have picked up slightly since then, with Bitcoin regaining some of its lost value in the course of a couple of hours to currently trade near $4,600.
As Bitcoin began to tumble, so did other of the top virtual coins, wiping billions from the entire cryptocurrency market in a matter of days. In fact, the drop was so severe that the US. Justice Department reportedly began investigating how the price grew so fast in the first place, according to CNBC.
As reported by the news channel, the Justice Department is looking into whether Bitcoin’s unexplainable 1,300% price rally last year was caused by market manipulation involving the Tether cryptocurrency. According to available information, the investigation is now focused on the Bitfinex exchange, which shares a number of executives with the Tether Company and is suspected of allowing traders to prop up prices.
Market Is Yet to Recover
During the last seven days, the price of Bitcoin dropped from a high point of $6,356 last Wednesday to a low of $4,282.23 on Tuesday. A bearish sentiment hit the cryptocurrency market hard, causing an eight-day sell-off that took Bitcoin’s price down by 78% from its all-time high or 69.26% year on year. In two days alone the price dropped by a staggering 25%, causing fears that the market is headed for a collapse.
Looking at the market stats, it’s evident that there was a huge surge in selling the coin as the 24-hour volume jumped from the usual $4 billion to $8 billion in two separate instances. The market capitalization has also dropped to $77 billion, or around $33 billion less than only two weeks ago.
As our technical analysis shows, the market is currently neutral, with 5 out of 12 oscillators and 4 out of 12 moving averages sending buying signals. However, given the strong bullish sentiment on the short-term charts and the current high trading volumes ($8 billion), Bitcoin could be headed for a recovery, as indicated by the past hours. But in times like these it’s best not to take a break from watching over the trading signals.
What’s Behind the Crash?
According to Forbes magazine, one of the main culprits for Bitcoin’s price collapse is the “civil war” fought by Bitcoin Cash developers which resulted in another coin split. After BCH split into two coins, Bitcoin SV and Bitcoin ABC, the supporters of both camps have continued to wage a “hash war”, each trying to amass more computing power and take over the network.
The feud has lead many crypto exchanges to make rash decisions as to how they will handle the split. Kraken – one of the biggest US-based exchanges – sent of warnings about the risks of trading Bitcoin SV while Hon Kong’s OKEx exchange swiftly changed the contracts on derivative contracts worth $135 million, leaving many traders with losses.
Other than the split, which only fortified the general public’s view of the instability of cryptocurrencies, Bitcoin was also hit by institutional players like the SEC, which began issuing civil penalties against crypto-companies about failing to register their ICOs, stirring fears that more companies will be targeted next. All of these factors built up to fear in the market, which is likely what triggered the initial sell-off and kept it going for several days.