The last time the crypto coins swam in red was in November. And this was quite understandable as one of the biggest crypto markets had just banned crypto- China.
The Chinese government at the time, went as far as ordering a complete shutdown of Bitcoin mining in its Sichuan province. And also told banks not to support crypto transactions.
With these restrictions, many did dump their mining equipment, and consequently, the prices of coins plummeted. The crypto market went down by over 9% but gradually bounced back.
A few weeks later and the ‘devil’s own luck’ seems to be knocking on the crypto doors once more. The crypto market is reporting a loss of an enormous amount of money ($300 billion) in a matter of hours. At some point, if you glanced at the coin prices, they were outrageously red and steadily declining.
So, what triggered the sudden bitcoin and crypto sell-off that led to a severe stock market decline?
Crypto Market: The Triggers
The dip was most likely caused by two things- A prediction from a famed investor and the recent uncertainty surrounding the future of crypto in some circles.
Bitcoin Liquidation Trigger
In the last hour alone Bitcoin has seen more than $1.79 billion of bitcoin longs liquidated. The liquidation seen in the last 24 hrs, this liquidation serves as one of the main reasons why the crypto market is seeing this red blood.
The Prophetic Trigger
A few days ago (Dec. 2), a top-growth investor Louis Navellier issued a warning. The investing veteran said that there were signs that a market crisis was in the offing. He specifically warned that the Federal Reserve’s “tapering” could burst the bitcoin and crypto bubble.
Louis Navellier. Source: Navellier Growth
“The Fed is tapering, and this should create a correction in risk assets, of which bitcoin is a part,” Navellier wrote. “The more the Fed tapers, the more volatility we should see in both stocks and bonds—and yes, bitcoin, too,” he said
Navellier noted that if the recent sell-off were to continue, it would set off a profoundly bearish reversal that would wipe out 80% of bitcoin’s value.
“I would take a decline below $46,000 (the 200-day moving average) to be a yellow flag and a decline below the spring low of $28,500 to be a completed massive double top which points to a decline to below $10,000, which incidentally would match many of the multiple 80%+ declines in its storied history.”
The Uncertainty Trigger
On the issue of uncertainty, the Asian country of India is our point of focus.
The government of India had earlier attempted to ban the use of crypto for some political reasons. But now, a parliamentary finance committee has come out with a contrasting decision to the government. The committee was of the opinion that the government should not restrict the crypto market. Instead, it should regulate it.
“…there cannot be a blanket ban. But many concerns were raised and everyone agreed on the need to regulate it.”
And now, the whole issue of regulation lies in limbo as the market doesn’t know what should be, who should regulate, and who to obey.
Source: CNBC
The newest Covid-19 variant identified on Nov. 25 in South Africa is also a cause of the uncertainty. One might remember how the previous Covid-19 waves have dealt the markets a blow and reconsidered their investment plan. As is now known, the Omicron variant has since been detected in more than 37 countries, including the U.S.
And with different crypto markets dealing with different challenges, the prices will definitely be unstable.