Last Wednesday saw the biggest fall in the history of bitcoin as its price dropped over $8,000 in a matter of minutes. The dramatic fall occurred quickly after El Salvador officially adopted bitcoin as a legal tender last Tuesday.
The dramatic 19 percent decline in bitcoin price was mirrored in the performance of other cryptocurrencies as well. Cryptos like Ripple, Ethereum, and Cardano created a major wipeout in the crypto market, equaling as much as $400 billion. In fact, most of the altcoins lost around 30% of their value a day prior.
The price drop happened after many believed to be witnessing another price surge of bitcoin. Some anticipated that the digital coin would return to its one trillion dollar cap and $64,000 peak of April 2021.
Technical analysis indicates that the price started dropping from $51,000 and quickly fell to $42,800. The sharp drop was followed by an increase of about 10% when bitcoin was trading at around $46,000.
Although bitcoin’s price drop was very significant, altcoins suffered more. For example, Ethereum lost as much as 24%, going down to $3,000. Cardano experienced a 30% drop, while Dogecoin dropped 31%. The total crypto market capitalization fell as much as 14 percent as the value of the whole market collapsed to $2.14 trillion from $2.48 trillion.
Market experts are talking about numerous reasons behind the price drop. Some view El Salvador’s adoption of bitcoin as one of the reasons – a step that was believed would have a positive impact on bitcoin price. Many are blaming technical factors for the recent developments, saying that the drop might continue in the near future.
The adoption of bitcoin as a legal tender in El Salvador was followed by numerous challenges. The crypto wallet of the country had several problems, which made it difficult for many to even download it on their smartphones.
Consequences of the drop
This was the most dramatic drop ever experienced in the history of bitcoin. It should not come as a surprise that it ended up creating a lot of problems and challenges in the trading market.
Some of the biggest crypto exchanges globally experienced many problems over the course of the drop. Crypto exchanges such as Coinbase, Bitspanda, Kraken, Gemini, OKEx, and many others, went down because of the ongoing events and the large sell-off of digital assets.
Whenever bitcoin crashes, most people are rushing to crypto exchanges to sell their digital assets with hopes of surviving. In such cases, exchanges see huge traffic, which affects their servers and ends up transactions getting stuck.
The main reason for such events is mostly panic selling, which occurs in the market whenever something of this scale happens. The CEO of Mudrex further explained that as much as 329,483 trades got liquidated in just 24 hours.
According to him, these liquidations happen when the accounts of traders run out of funds and the account balance is closer to going negative. When such dramatic drops happen, many investors are starting panic selling, which further drops the price.
Coinbase, one of the largest crypto exchanges in the market, Tweeted that the sudden increase of the traffic and unprecedented market activity led to the degrading of Coinbase’s servers. Because of this, the company said that funds settlement would be delayed.
While many crypto exchanges suffered and experienced outages, others managed to stay online throughout the whole time. These events once again indicate how important it is for companies to perform timely and much-needed upgrades to their servers and make sure their technology is in a condition to survive such market turmoils.
While most of the crypto exchanges froze, the Bitsgap trading platform stood tall. The platform remained fully operational throughout the day and processed over 15 million orders within 24 hours. It is as much as 625,000 orders per hour, and almost 15,000 orders per second.
Bitsgap was quite helpful for its clients. While numerous exchanges were down for hours, those exchanges were still accessible with Bitsgap. All of the smart orders and trading automation offered by Bitgap were executed in a timely manner, which allowed the clients of the company to not only secure their investments but even make significant profits.
What can be learned from this?
Bitcoin is no stranger to drastic price drops, but the recent developments were something new even for the bitcoin and the whole crypto market. There are many things that can be learned from this situation.
The drastic price drop ended up creating numerous problems. Not only did many people lose their investments, but some were not even able to access their exchanges to do anything. It shows that there is a serious need for these exchanges to work harder and further develop their platforms, to make sure they are up-to-date with market needs.
One of the great examples of companies that managed to remain functional throughout these whole processes is Bitsgap, a company that has worked hard for the past several months on countless system upgrades.
There are numerous reasons the experts are talking about the recent developments, however, it is hard to say that it was caused by one single thing.