The cryptocurrency market took a sharp downward turn last night, as prices across the board plunged and sellers looked to liquidation to recoup their losses.
Between approximately 11:00pm CST on January 7th and 10:00am CST on January 8th, cryptocurrency's total market cap fell 14%, dropping from $814bln to $700bln throughout Monday morning.
Coin Market Cap to Blame?
The precipitous price drop was a bit too steep a bit too quick for some, and skeptics have taken to social media platforms to say that this is a product of Coin Market Cap, not organic price fluctuations.
In a Reddit post to r/cryptocurrency, for example, u/dzigiord makes the argument that Coin Market Cap removed South Korean exchanges from their price prediction models sometime between the late hours of Sunday and the early hours of Monday. Reacting to this change, Coin Market Cap’s prices and graphs were thrown into an immediate nosedive, as Korean markets like Bithumb and Coinone make up a significant share of the market. As u/dzigiord pointed out, these prices are often much higher than their western counterparts, as South Korean exchanges have substantial premiums for fiat to crypto trading pairs.
When western sellers saw the artificial drop, the original poster continues, they began to sell their currencies “to ‘cut loses’ because of the false impression that [sic] coin is crashing.”
Other users chimed in with additional explanations that factor into u/dzigiord's own. As u/Omario explained, “[a] large portion of trading is controlled by bots, if lots of bots are using [Coin Market Cap] APIs (and there's probably a lot) it would explain what is happening."
Crypto enthusiasts took to Twitter to echo these sentiments, including Bitcoin Foundation co-founder Charlie Shrem, who cited u/dzigiord’s post:
Was wondering why $100B left the market today. Here’s my answer https://t.co/Ta9PCgF63w
— Charlie Shrem (@CharlieShrem) January 8, 2018
Giving Credence to These Claims
A quick review of chart and market viewers on Coin Market Cap seems to agree with the community’s prognostications.
Looking at Ripple, one of the major casualties of this debacle, we can see that the prices for South Korean exchanges are excluded from the currency’s data. Excluded data are denoted by asterisks, and if we look at markets for other coins, such as Bitcoin or Bitcoin Cash, the result is the same.
Moreover, if we look at the charts for crypto’s total market cap and, say, Ripple's own at the time that the exchange’s were supposedly removed, we see a sharp drop in price. Unlike organic price dips, these are recorded as practically vertical corrections, corroborating the claim that the immediate fall in market value was spurred on by Coin Market Cap's removing South Korean data from their website.
At press time, it appears as though the market is bouncing back, sitting at a less worrisome $722bln.
Coin Market Cap did not immediately respond to CCN’s request for comment.
Featured image from Shutterstock.
Last modified (UTC): January 8, 2018 7:30 PM