Bitcoin price
The cryptocurrency market resembles a sea of red as all major and lower coins stumble with losses | Source: Shutterstock.

Crypto Carnage: $6 Billion Wiped Out as Bitcoin Drops to $3,350 – What’s Causing the Drop?

In the last 24 hours, the Bitcoin price has dropped from $3,550 to $3,357 on the day’s low, by more than five percent.

The abrupt decline in the Bitcoin price led the crypto market to lose nearly $6 billion within hours. Some major crypto assets including Bitcoin Cash (BCH) recorded losses of over 10 percent, experiencing the steepest decline in the month.

Chart from TradingView

Some analysts expect the Bitcoin price to drop to a new 12-month low following the short-term drop in the valuation of the crypto market.

Factors in the Decline of the Bitcoin Price

Since early January, for over three weeks, the crypto market has struggled to show a high level of volatility on the upside.

Bitcoin maintained stability in a tight range between $3,500 to $4,000 from January 11 to 27, for 16 days.

The sudden decline in the price of Bitcoin and other crypto assets is likely to have been triggered by technical factors rather than fundamental.

Josh Rager, a cryptocurrency trader, said on January 28 that if the price of the dominant cryptocurrency drops below the $3,400 mark following two weeks of stability, a drop to its 12-month low is inevitable.

“BTC continues to look weak. Eventually, alternative cryptocurrencies succumb to Bitcoin. If Bitcoin breaks and closes sub $3,445 area it will retest the 2018 lows If not, BTC continues its sideways action similar to the pre-capitulation at $6,000,” he said.

The common narrative for a bullish price movement of Bitcoin in 2019 has been the start of an accumulation period subsequent to a long-lasting bear market.

However, many analysts explained that an accumulation period does not necessarily lead to a mid-term rally.

An economist and cryptocurrency analyst Alex Krüger stated:

For someone to accumulate, someone else has to distribute. It is a zero sum game. Accumulation per se is neither bullish nor bearish. With the current trading volumes, I’d bet on exchanges and miners currently ‘accumulating’. Eventually they will likely start dumping again.

Earlier this week, CCN reported that the cryptocurrency industry is expanding and the number of companies in major regions is increasing steadily.

Source: Blockchain.com

Fundamental indicators such as the transaction volume of the Bitcoin network, which average at around 280,000 transactions per day, and the usage of decentralized applications (DApps) on smart contract protocols have demonstrated a recovery since late 2018.

Given that a tight price range in which most cryptocurrencies were relatively stable in for weeks has been broken, volatility to the downside is expected in the upcoming weeks.

If the price of Bitcoin drops to its 12-month low to $3,122 as some analysts foresee, the value of other major crypto assets and small market cap tokens will likely drop largely against both Bitcoin and the U.S. dollar.

Already, Ethereum fell by more than seven percent on the day from $112 to $104, becoming dangerously close to dropping below the $100 support level.

A cryptocurrency trader with an online alias “The Crypto Dog” who shorted Ethereum in early January suggested that Ethereum has been on a downward trend for a while.

“ETH is, in fact, moving towards my target. I’d like to follow up the short with an unlevered long targeting new highs for 2019, spreading bids to fit an average entry $97.50 and a loose stop loss near $90,” the trader said.

Gloomy Short-Term Future

In the short-term, overall, traders expect major crypto assets to perform poorly against Bitcoin and the U.S. dollar.

Bitcoin Cash has been overtaken by Tether (USDT), a stablecoin backed by the U.S. dollar at a 1:1 ratio. Even TRON, which experienced 134 percent monthly gain, has started to decline, losing nearly 10 percent of its value within a 12-hour span.

If Bitcoin can remain above the $3,400 level throughout the next few days, traders believe it could prevent a further drop to the low $3,000 region.

Click here for a real-time bitcoin price chart.

Featured Image from Shutterstock. Price Charts from TradingView.