Crypto Market in Free Fall- Is it Fundamental, Technical or Something More Sinister?

There is an unprecedented free fall in prices of nearly all major cryptocurrencies in past 24 hours. While there is no specific reason that one can gauge for this mysterious free fall, a lot of reason seems to be popping out from various corners explain the fall.

The fundamental- Goldman Sachs trading desk pull out and shapeshift registration

While the cryptocurrencies were pretty steady with Bitcoin hovering around at around $7,350 during most of the trading during the daytime in Asian and European markets, the crackdown actually began in early hours of trade in the United States. Much of there decline was due to the Business Insider Report that said

“Goldman has moved plans to open a desk for trading cryptocurrencies further down a list of priorities for how it can participate in cryptocurrency markets, according to people familiar with the matter.”

In response, the bank released a statement:

“We have not reached a conclusion on the scope of our digital asset offering,” it said.

Goldman Sachs’ this move sent tremors to the market as the bitcoin and wider cryptocurrency markets have been well supported by news that this year that institutional money was about to get into crypto via an ETF or trading desks of these huge investment banks — and the traders are in dilemma questioning whether that money is really on its way or not.

While Goldman trading pulls out was a shocker what added fuel to fire according to Tanya Abrosimova of FX Street was that the introduction of a registration process for popular instant bitcoin exchange ShapeShift. According to her report. The new system implies that users will have to provide their personal data.  For now, the registration is optional, but soon it will become obligatory. The company positions the new initiative as a sort of loyalty program that will offer users additional benefits like favorable exchange rates, rewards for FOX token transactions. ShapeShift’s CEO Erik Voorhees to admit, that the compulsory registration is a painful but measure, dictated by the unclear regulatory landscape.

Technical- the expiration of CME’s BTCQ18 futures

While if technical guys or the one who track crypto derivatives are to be believed, the expiration of CME’s BTCQ18 futures contract took place on August 31, which was followed by a price surge, taking Bitcoin from around $6,850 to $7,380. The settlement date of that contract was due for today, September 6. The unfolding of positions in the future markets could have allowed traders to take advantage of the situation and cause these huge volatilities in the market.

Another technical point to be noted here is Futures contracts have always been aimed at increasing liquidity and decreasing volatility, which was also evident as August recorded the lowest volatility in Bitcoin futures contracts since they started in December. Such reduced volatility and high liquidity help large investors to remove retail traders from the picture on the swings, and increase their own holdings via accumulation, and if an ETF proposal does get approved anytime soon, these investors stand to gain the most. Although one may call it price manipulation by large traders, but that’s how derivatives behave and are capable of mass destruction.

Something else- Is there a manipulation involved- Insider trading or the SilkRoad wallet

According to a report published in Sludgefeed, an unidentified investor took out a massive short position on BTC just days prior to the major sell-off fueled by leaked insider information pertaining to Goldman Sach’s decision to halt its efforts to build a Bitcoin (BTC) trading desk.

“The investor took out a 10,000 BTC short this past Sunday, roughly equalling $74 million at the time. This short brought the total market short positions on BTC up to 32,000 BTC, which has since surged to more than 37,500 BTC during the recent downturn.”

While it is impossible to determine if this particular investor had access to the Goldman Sachs information prior to it being released, these types of trades would definitely raise red flags in traditional capital markets.

Some also point this fall to the Silkroad Wallet, which was bought to the notice of the World by a Redditor, that had been reactivated and early 16,000 BTC have been transferred from a wallet to major cryptocurrency exchanges, including Binance and Bitfinex. The major investor may have started dumping his holdings on the market, as the trading volume for Bitcoin reached $5.5 billion over the last 24 hours.

Whatever be the reason -Fundamental, Technical or Manipulation one can’t deny the fact that a lot of investors, especially in the retail space, may be trapped. A large fall is not good for the markets as it takes out money from the industry at a great speed creating the panic-like situation.