Why is crypto down? Bitcoin, Ethereum, Dogecoin price crash explained

The price of bitcoin, Ethereum and a range of other cryptocurrencies crashed badly overnight. So what has the market spooked?

Bitcoin fell to a low of $46,255 (AUD) today as major cryptocurrencies across the board continue to shed gains.

Overnight the price of the biggest cryptocurrency dipped below the $50,000 (AUD) mark per coin for the first time in over three months.

Bitcoin’s plunge came amid a broader sell-off of cryptocurrencies that saw the overall market lose about 20 per cent of its value, or over $425 billion, in 24 hours, according to data from coinmarketcap.com.

As of 11.30am (AEST), bitcoin was trading at about $47,500 per coin, according to coinmarketcap.com.

That means the digital coin has lost all of its gains since early February, around the time that Tesla announced it had bought $2 billion worth of bitcoin, which helped spark a run-up in price that saw bitcoin peak at over $82,000 per coin in April.

Bitcoin is still up over 300 per cent compared with a year ago.

Other major cryptos posted staggering losses too.

Ether, the digital coin native to the Ethereum blockchain, fell about 20 per cent and binance coin fell almost 27 per cent, according to coinmarketcap.com. Dogecoin was down about 20 per cent.

Why crypto is down?

A variety of bad news over the past week could have sparked the sell-off.

“This week cryptos really seem to be in the firing line, they’ve been hit by tax returns, Elon Musk, who’s hugely influential in the crypto space, major platform outages, and now, a move in the asset class today that feels like capitulation,” Anthony Denier, CEO of trading platform Webull, said. “All of these things combined are likely to have rattled investors causing them to sell.”

What has Elon Musk said?

Telsa CEO Elon Musk says his company is holding on to its crypto. (Photo by Brendan Smialowski / AFP)

Last week, Tesla CEO Elon Musk said the electric carmaker would no longer accept bitcoin as payment for its cars, citing environmental concerns associated with the “mining” of bitcoins. Musk’s comments wiped about $388 billion off the cryptocurrency market that day.

And earlier this week, Musk appeared to imply in a tweet that Tesla either had sold all of its bitcoin holdings or planned to. Hours later, he clarified that Tesla has not sold any bitcoin.

Musk tweeted at 1am AEST to indicate Tesla was standing firm despite the crash.

Tesla has 💎 🙌

— Elon Musk (@elonmusk) May 19, 2021

The diamond hands emojis, as KnowYourMeme explains, is a reference to “traders who believe in the eventual profitability of their stocks and securities and keep holding them while their value drops.”

What part did China play?

Finally, on Tuesday, three Chinese banking and payment industry bodies issued a statement warning financial institutions not to offer clients any service involving cryptocurrency, including registration, trading, clearing and settlement.

“Recently, crypto currency prices have skyrocketed and plummeted, and speculative trading of cryptocurrency has rebounded, seriously infringing on the safety of people’s property and disrupting the normal economic and financial order,” they said in the statement.

China has already banned crypto exchanges and initial coin offerings but has not barred individuals from holding cryptocurrencies.

Will crypto go back up?

Pete Cheyne, Founder of Bottlepay, a bitcoin-based global payments app, said he’s undeterred by the recent crash.

“Those of us in the space are battle hardened to these kind of events, we will continue forward building value into these burgeoning protocols,” he told the Post. “When zooming out on the charts, these intraday repricing events are hardly recognisable. It’s best to look at the markets with a long-term lens.”

Julius de Kempenaer, senior technical analyst at Stockcharts.com, added that a rapid recovery is possible, but the overall upside potential is limited and the downside risk is huge.

“The saying never catch a falling knife seems very appropriate as it is raining knives in the crypto space at the moment,” he said.

Cathie Wood, founder of ARK Investment Management LLC, still believes Bitcoin will hit $500,000.

Many remain bullish on Bitcoin’s prospects. (Photo by Justin TALLIS / AFP)

“We go through soul-searching times like this and scrape the models, and, yes, our conviction is as high” as it has been, Wood said on Bloomberg TV.

She described today’s crash as a “capitulation phase”.

“You never know how low is low when a market gets very emotional,” she said. “We were looking at all the indicators this morning. They are all suggesting that we are in the capitulation phase, which is a really great time to buy, no matter what the asset is.”

Billionaire Mike Novgratz, the founder of cryptocurrency investment firm Galaxy Digital, said: “We will pump again once the selling is finished.”

Crypto portfolio today. 😂. We will pump again once the selling is finished. pic.twitter.com/uGloPBwfne

— Mike Novogratz (@novogratz) May 19, 2021

Cryptocurrency prices in Australia

— Bitcoin $50,479.72

— Ethereum $3405.56

— XRP $1.49

— Stellar $0.628552

— Dogecoin $0.468945