Trillions of dollars go up in smoke in two hours, why cryptocurrencies can be instantly decimated

On May 19, Bitcoin fell from $43,000 to a low of $29,000, a 24-hour drop of up to 30%.

Trillions of dollars go up in smoke in two hours, why cryptocurrencies can be instantly decimated

A long-term immersion in the global secondary markets would reveal that the Nasdaq, which is dominated by technology assets, reached its relative highs a month ago and began to dip. And that includes former tech leaders like Tesla that have long since pulled back more than 30% from their highs. Today it’s finally bitcoin’s turn.

What was thought to be an ordinary day has been recorded as another memorable and reviewable day in the history of the cryptocurrency industry because of a rare plunge.

The “519 Pullback

On May 19th, the cryptocurrency industry was devastated as Bitcoin fell from $43,000 to a low of $29,000, a dramatic drop of $13,000, and a maximum 30% drop in 24 hours. Such a dramatic drop is not common in the cryptocurrency industry, which is known for its high volatility.

With the ‘crash’ of Bitcoin, other cryptocurrencies did follow suit, with a large number of projects dropping by more than 50% and prices dropping straight to the waist, or even toe chopping.

At the culmination of the crash, which took place between 8 p.m. and 10 p.m. on May 19, bitcoin fell below $30,000, ethereum fell below $2,000, and mainstream cryptocurrencies fell anywhere from 30%-60%. According to CoinGecko data, the total market cap of the overall cryptocurrency market was once just under $1.6 trillion, just a few days after Bitcoin’s $62,000, when the total cryptocurrency market cap was over $2.5 trillion.
Trillions of dollars evaporated in a matter of days.

The ferocious drop triggered panic among all investors, and the high concurrency of stop-loss closures tested the ability of trading platforms, but even Coinbase, the nation’s largest cryptocurrency trading platform that just went public, was down for a short time, and Coinbase’s stock COIN plunged 12% after the opening bell to a new all-time low.

According to coin coin, more than 500,000 people in the cryptocurrency market blew up their positions within 24 hours, with a volume of $6.4 billion, or about RMB 41.1 billion, which is the largest amount in the history of a single day. On March 12, 2020, a day known as “312” in the industry, a 50% drop in Bitcoin in a single day brought a blowout of RMB 22 billion, the highest amount in history at the time, and a year later, “519” set a new record.

In addition to the secondary market, the blockchain’s on-chain data also showed anomalous values. Ether’s on-chain was congested again, the on-chain transfer fee Gas spiked to 1000 Gwei again, close to a historical high, and the world’s largest cryptocurrency trading platform Coinan briefly suspended withdrawals of Ether’s on-chain tokens due to on-chain congestion.

A few hours later, Bitcoin stabilized and rallied back above $40,000. However, for those 500,000 people, they had lost their capital to continue the fight. Just as investors replied below Tesla founder Elon Musk’s tweet.

The “god of chaos” reappeared as the market cried out, using the term “diamond hands,” a technical term that means “firm hold” in the stock market, to suggest that Tesla is holding on to more than $1 billion in bitcoin. This time, his tweeted responses were no longer filled with hails of approval, as blame and remorse after the crash brought everything down to zero filled the comments section of the world’s top KOL, who once steered the cryptocurrency market on his own.

Searching for the Cause of the Plunge

If discussed rationally, there are several reasons for this chopping level of volatility.

First is the US stock market.

Bitcoin and U.S. stocks have been following each other. In “Are You Thinking About Shorting Bitcoin,” Rhythm explains the relationship between Bitcoin and tech assets. In the second half of last year, NASDAQ tech assets continued to set new all-time highs for each, but Bitcoin didn’t budge until October, when it started its own bull market.

And now, it can actually be seen as following suit. With the Nasdaq already down 5% from its highs and tech asset leader Tesla pulling back more than 30%, this 30% pullback in 24 hours in bitcoin, a leading tech asset in the blockchain industry, could also have a tech bubble bursting trend to blame.

The second is policy.

Just a day before the plunge occurred, the China Payment Clearing Association, the China Internet Finance Association and the China Banking Association issued a joint announcement stating that financial institutions, payment institutions and other members should effectively enhance their social responsibility and not use virtual currencies to price products and services, underwrite insurance business related to virtual currencies or include virtual currencies in the scope of insurance liabilities, or directly or indirectly provide customers with Other services related to virtual currency, including but not limited to: providing customers with virtual currency registration, trading, clearing, settlement and other services; accepting virtual currency or using virtual currency as a payment and settlement tool; carrying out exchange services between virtual currency and RMB and foreign currency; carrying out storage, custody, mortgage and other businesses of virtual currency; issuing financial products related to virtual currency; using virtual currency as a trust, fund In April, the company’s business was launched.

Moving forward, in April, CITIC Bank issued a statement that, effective immediately, no institution or individual may use CITIC Bank accounts for the top-up and withdrawal of Bitcoin and Litecoin transaction funds, the purchase and sale of related transaction top-up codes, or the transfer of related transaction funds through CITIC Bank accounts. Once discovered, CITIC Bank reserves the right to suspend the relevant account transactions and cancel the relevant account.

These seemingly non-authoritative, but continuing and increasingly frequent policies have been interpreted by many as a tightening of regulation.

Overlaid with the proliferation of information such as “carbon neutrality” and mining inspections in some areas, especially the idea that Bitcoin is a waste of resources and a drain on resources spreading among well-known KOLs like Musk and Bill Gates, has led to an escalation of fear among some individuals and overseas institutions could also be part of the reason for the pullback.

These are all rational discussions. Next, from an emotional point of view, this seems to be a market fix because the sentiment on the floor is just too high.

Cautious and rational investment

The so-called “zoo market” you must remember, we don’t look at the later FOMO projects, only at dogcoin and shiba coin.

There are many worthy value investment targets in the industry, they also have high returns in this bull market, such as decentralized trading platform leader UNI, market cap once in the top ten, has been the absolute core in the DeFi field, once changing the DeFi ecology, trading volume deployment centralized trading platform.

But such a project, the market value is not as good as dogcoin.

If we look at the cross-chain leader Cosmos and the new public chain representative Avalanche, which are well known in the industry, these projects that at least have ecology, application, team and users are now not as high as the market value of Shiba Inu coin.

Without comparing with cryptocurrencies internally, let’s look at tech assets. Dogcoin’s market cap was once $50 billion, ranking within the top 200 global assets in Asset Dash statistics, and below Dogcoin are top internet companies like Airbnb and Uber.

With these phenomena, it has been hard to find a self-consistent logic to convince yourself that there is no bubble in the market. Dogcoin and Shiba Inu coin are just typical examples of certain projects. Are these projects really worth such a high market cap?

There will be arguments that this is the value of consensus, or the value of new ways to play in the cryptocurrency world. But there is a degree of value after all. When an asset born out of a joke can exceed the market value of internet companies that have taken the world by storm after being shouted by KOL, this is already obviously not normal.

Starting with the 8 p.m. plunge on May 19 and ending with Bitcoin back at $40,000 at 1 a.m. on May 20, it appears that Bitcoin’s price only dropped by single digits in terms of price, but a sentiment cool-down cost half a million people their capital to keep fighting.

Is a bear market next? I don’t know, maybe bitcoin will continue to surge higher, or maybe the bull market is now over. But either way, what’s needed is for investors to calm down.

Highly leveraged, highly speculative assets do make your books look better and better, but only if you can walk out of the battlefield alive. In the words of a trader friend, “In a bull market, the winner is not the most important, the leftovers are the most important. The most important thing is to make sure you stay alive first.

In a strong bull market, there are only a few who can actually make money in the end.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2021-05-19 22:39
Next 2021-05-19 22:49

Related articles