Over the past 24 hours, the crypto market has experienced a large sell off as Bitcoin demonstrated a 3 percent drop in price, leading the market to drop $10 billion.
Ethereum and EOS recorded the largest drop amongst major cryptocurrencies at 9 percent, while Bitcoin Cash, Litecoin, Monero, Cardano, and Dash demonstrated steep 7 percent losses.
What Caused the Steep Decline?
On September 16, CCN reported that a wallet containing $720 million in Bitcoin, which was dormant for many years, started to move funds to Bitfinex.
A Reddit user with an online alias u/Sick_Silk claimed that the wallet is owned by a Silk Road-related figure, who was most likely involved in the operation of the dark web marketplace. The user said:
“It seems that the owner of a huge SilkRoad related wallet is moving funds actively since 3 days, dividing it in chunks of 100 coins by subwallets. The original wallet owned 111,114.62 BTC / BCH , which is currently valuated ~ $844M (without taking in account other #Bitcoin forks). Last movements on these subwallets are 4 years and 5 months old (March 9th, 2014).”
WizSec, a Japan-based security agency which discovered the money launderer behind the stolen funds of the now-defunct cryptocurrency exchange Mt. Gox, stated that the wallet is completely unrelated to Silk Road but rather to Mt. Gox. Analysts at the agency explained that a whale investor who purchased a massive batch of Bitcoin a few years back have started moving the funds.
It is possible that the sell-off of hundreds of millions of dollars in Bitcoin initiated by one whale investor caused a domino effect across all major cryptocurrency exchanges, causing the market to drop substantially.
Prior to September 18, major digital assets like Bitcoin and Ethereum demonstrated stability in the low price range, showing signs of a short-term bottom. Hence, it required a large sell-off and an unforeseen event in the cryptocurrency exchange market to trigger a drop of this magnitude.
Where Does the Market go Next?
Two days ago, Edward Morra, a respected technical analyst in the crypto space, stated that a drop below the $6,000 support level is not likely for Bitcoin.
“Market cap might close as a nice green hammer today on weekly close, last 2 times we did that - we went for little rally for couple of weeks Can't be very bearish here to be honest,” Morra said.
For a few weeks, the market has shown extremely oversold conditions, which most likely led BTC to cap its drop at 3 percent. While other cryptocurrencies fell by larger margins, BTC successfully avoided a drop below the $6,000 support level, remaining above $6,200.
Given the trend of the market throughout September, it is likely that the temporary decline in the market will be recovered in the next few days, allowing the market to rebound to $200 billion.
The market has still avoided reaching its yearly low at $186 billion, which is one optimistic outcome of the drop.
Featured image from Shutterstock. Charts from TradingView.