Bitcoin prices fell to almost $95,000 today. (Photo illustration by Chesnot/Getty Images)
Bitcoin prices hovered near the $95,000 mark on Thursday evening, December 26, after losing nearly 5% of their value in less than 24 hours.
The world’s most popular digital currency fell to just $95,083.93 earlier that day, according to Coinbase data from TradingView.
The cryptocurrency fell to this level after approaching $99,900 on Christmas Day, further Coinbase figures from TradingView show.
As a result, the digital asset lost about 4.8% of its value in a matter of hours.
After falling to this level, Bitcoin recovered somewhat but was still trading between $95,000 and $96,000 at the time of writing.
When explaining the cryptocurrency’s recent decline, analysts highlighted several possible causal factors.
Insufficient trading volume
One development repeatedly highlighted by market observers was the low trading volume, which made it easier for Bitcoin to experience stronger price movements.
“With both Christmas and New Year falling in the middle of two consecutive weeks this year, markets are anticipating a longer period of low holiday volume than usual,” Psalion managing partner Tim Enneking said by email.
“Low volumes often result in greater volatility as smaller order sizes can have an outsized impact,” he explained.
According to Alex Lin, co-founder and general partner at venture capital firm Reforge, lackluster trading activity appears to be a typical occurrence this time of year. He described this as a “common phenomenon” based on emailed posts.
TradingView malfunction
In this environment of reduced trading volume, several market observers pointed out that an apparent malfunction on the TradingView website contributed to Bitcoin’s recent decline.
The situation, previously reported by Cointelegraph, resulted in the website temporarily stating that Bitcoin’s dominance, i.e. its share of the overall cryptocurrency market, had dropped to zero.
Marc P. Bernegger, co-founder of the crypto fund of funds AltAlpha Digital, commented on this situation via email.
“The recent fluctuations in the price of Bitcoin, which fell from nearly $100,000 to around $95,000, appear to have been influenced by a bug in TradingView,” he explained.
“This error incorrectly displayed Bitcoin dominance at 0%, causing panic among traders and subsequent market volatility.” This led to significant liquidations, with around $33 million worth of Bitcoin long positions liquidated within a few hours “Bernegger added.
Lin also mentioned this particular development.
“There was also an unexpected error on TradingView where Bitcoin’s dominance indicator fell to 0%, which may have triggered additional outflows,” he explained.
“So panic selling due to the technical error into a low-liquidity environment, compounded by strategic profit-taking after a relatively positive year, and large institutional moves of $338 million in BTC ETF outflows on Christmas Eve are the most likely triggers “Decrease in the last 24 hours,” the analyst added.
Market separation
George Kailas, CEO of Prospero.ai, offered a different perspective on the causes of Bitcoin’s recent price declines, focusing on a short list of factors.
“I think what we’re seeing here are two things,” he said via email. The first was “a natural correction in an asset that was moving up as quickly as you can expect from anything.”
“In that sense, one of the reasons I think these swings are so violent is the disjointed nature of political expectations without politics,” he explained, helping to flesh out his views on the issue.
“Expectations have skyrocketed for an American president who is friendlier to cryptocurrencies than any we have seen before,” Kailas said.
“But these are just expectations, even if one rightly assumes that politics is quite friendly to cryptocurrencies, this policy does not yet exist,” he noted.
“Firstly, there must be a certain probability that some promises will not be fulfilled,” emphasized the analyst.
“Furthermore, it will be difficult for the market to put a fair price on the impact of these measures, even if they come into force.”
“But when it comes to policies and expectations of politics, at least the market can figure them out in reality compared to layers of speculation,” he emphasized.
Disclosure: I own Bitcoin, Bitcoin Cash, Litecoin, Ether, EOS and SOL.
