What goes up must come down, especially when it comes to bitcoin: Its price has plunged again after breaking through the psychological $4,000 barrier over the weekend.
In the week since, bitcoin maintained a trading band between $3,800 and $4,000 until late Saturday, when the price rallied above $4,000.
Bitcoin’s price peaked at $4,157.90 at 2 a.m. EST Sunday before profit takers stepped in, knocking the price down to $3,767.37 as of 8:30 p.m. EST.
Although it’s too early to suggest that it might be the end of a mini-bull run, with bitcoin’s price returning to nearly the same price it had sat for the last week, something strange has occurred.
“The cause of the sudden sell-off was not immediately apparent, however, when prices have risen and fallen quickly in the past it’s been put down to traders and investors profit-taking and flooding the market with surplus digital tokens,” Forbes reported.
What is clear is that investors were moving extremely large amounts of bitcoin through exchanges. According to NewsBTC, Binance, the world’s largest cryptocurrency exchange, faced delays “as they incurred an all-time-high trading system load earlier today.”
There’s no apparent evidence of market manipulation, but the same report noted that the recent surge in volume “signals that cryptocurrency traders are becoming increasingly keen on finding trading opportunities during the relatively quiet market conditions.”
One theory for bitcoin’s price surge, though not its subsequent drop, is interest in a forthcoming Ethereum hard fork. In a hard fork, the blockchain behind a cryptocurrency splits into an old chain and a new chain.
In an ideal world, everyone would support the new chain, but in practice what usually occurs is that some support the new chain and some the old chain. That creates two cryptocurrencies, with investors in the original blockchain credited with tokens in both.
Since early February, Ethereum has increased in price by as much as 60 percent as investors flooded into the cryptocurrency on the expectation that it may split into two.
Bitcoin usually leads the price movements of other cryptocurrencies, but sometimes increased demand in other cryptocurrencies can likewise have flow-on effects on bitcoin. In this case, the price increase in Ethereum may have encouraged a price rise in bitcoin.
In any case, Ethereum dropped further on Sunday than bitcoin did. While bitcoin was down about 8.6 percent, Ethereum dropped 14.5 percent, to $135.79. The higher the up, the further the down.
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