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Four possible reasons for Bitcoin's drop from 9,200 to 7,600

2020/3/10

Bitcoin has not been performing well in the past few days. Since reaching $9,200 last Saturday, Bitcoin has plummeted by 1,600 points, hitting a low of $7,600, a drop of over 17% from the Saturday high. This led to the liquidation of long positions worth over $200 million on BitMEX. So, what exactly caused such a massive drop?

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Hedge Funds Cause Bitcoin to Fall

The CEO of financial media startup Real Vision, Raoul Pal, who previously served as the head of sales for European hedge funds at Goldman Sachs, has been advocating for Bitcoin since 2013. Raoul Pal believes that the recent weakness in BTC may be related to hedge funds. In a tweet he posted on Monday

"Feels like all the hedge funds who are long Bitcoin have to puke. VAR shocks mercilessly." (VAR represents the maximum potential loss in a financial asset or securities portfolio under normal market fluctuations. Therefore, as the volatility of all assets rises, they have to reduce risk.)

It feels like any hedge fund that was long bitcoin is having to liquidate. VAR takes no prisoners. (For those new to VAR it is the measure of risk in a portfolio and is connected to volatility, so as vol goes up of all assets, they have to reduce risk). $BTC #Bitcoin
— Raoul Pal (@RaoulGMI) March 9, 2020

Indeed, according to market trends, the volatility of BTC has been soaring in the past few days, and the market trend is bearish, hedge funds' positions will inevitably need to be adjusted.

Although Raoul Pal attributes the decline in Bitcoin to hedge funds, he still believes that the current state of the fiat markets is accelerating the demand for a new financial system over time, leading to a digital revolution, making the current dip in Bitcoin a good entry point.

Other Potential Reasons

In addition to hedge funds adjusting their portfolios, there seem to be other potential reasons that have led to the significant retreat of Bitcoin this time. According to the renowned cryptocurrency analyst Jacob Canfield'stweet, the global spread of COVID-19, miners hoarding coins, and the sell-off by PlusToken could be potential reasons.

COVID-19 Outbreak: Following a strong rebound at the beginning of the year, from the U.S. stock market (Dow Jones, S&P 500, etc.) to cryptocurrency assets, the entire financial market has been severely hit in the past few weeks. While some believe that the sharp drop in Bitcoin prices is not directly related to the sell-off in other markets, analysts have observed a significant decrease in trading volume in the mainstream cryptocurrency market since the outbreak of the pandemic. This suggests that Bitcoin's liquidity has significantly decreased for some reason, increasing the possibility of a price collapse.

Bitcoin Miners Selling Hoarded Bitcoin: Charlie Morris, the founder of cryptocurrency analysis platform ByteTree, pointed out when Bitcoin was priced at $8,700 on March 5ththat miners were hoarding BTC to cope with negative returns due to price declines. Subsequently, after Bitcoin prices rose and touched $9,200 on March 8th, miners may have thought that the target price had been reached and began selling off the hoarded Bitcoin in large quantities.

PlusToken Transferring Bitcoin Again: Bitcoin blockchain researcher Ergo discovered that PlusToken (a cryptocurrency scam scheme with a total amount in the billions) transferred 13,000 BTC (worth over $100 million) to a mixer. PlusToken has previously executed the same operation by first transferring Bitcoin to a mixer to increase traceability difficulty, then sending Bitcoin to exchanges, and selling it at market price, converting it into fiat currency or stablecoins.

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Hedge Funds Cause Bitcoin to Fall

Other Potential Reasons

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