Crypto market is crashing hard again, here’s why

Image: Photo by Yu Chun Christopher Wong/S3studio/Getty Images

The cryptocurrency market is bleeding for the second consecutive day, with prices of most popular coins down double digits in the last 24 hours. 

Bitcoin, the largest cryptocurrency by market cap, is down 12.4% in this period according to CoinMarketCap and is currently trading at $6,426. Other coins are having it even worse: Ethereum is down 20.5%, Ripple is down 13.3%, Bitcoin Cash is down 20.1% and EOS is down 22.3%. 

For Ethereum, the second largest coin by market cap, this is the low point of the year. The cryptocurrency hasn’t been priced this low since August 2017.

Overall, the market cap of all cryptocurrencies put together is currently at $202.9 billion and threatening to reach this year’s low of about $190 billion. 

There are several likely reasons behind the crash. On Wednesday, Business Insider reported that Goldman Sachs has put its plans to launch a crypto trading desk on hold. Goldman Sachs has been one of the major banking institutions which had showed real interest in Bitcoin, having funded Bitcoin startup Circle back in 2015, and reportedly (though not officially) mulled the idea of launching a crypto trading desk since late 2017. 

While the fear that institutions are losing interest in cryptocurrencies is a valid enough reason for caution, crypto traders appear to be more concerned about dangers lurking in the shadows of black market platform Silk Road. A Redditor has traced more than 111,000 thousand bitcoins (worth more than $700 million) associated with Silk Road, that have recently been moved to wallets of various online exchanges, possibly with the intention to sell. 

Huge amounts of bitcoins being moved to exchange wallets give traders the shakes, as it likely means a lot of selling pressure on the price.

We’ve seen something similar in April, when it was revealed that a trustee for the now-defunct crypto-exchange Mt Gox has been steadily selling large amounts of bitcoins, with a lot more to sell. 

Notably, at $7,951, back then the price of Bitcoin wasn’t that far from today’s price, but the price of Ethereum has more than halved since then, from $592 to the current price of $226. The reason for this is probably selling pressure from numerous startups that were successfully funded through ICOs, and are now selling the ether they raised. 

In any case, the crypto market’s upward momentum that started mid-August has been brought to a screeching halt. The crypto world is still eagerly awaiting SEC’s decision on a few proposed Bitcoin ETFs, which should come in late September, A positive ending to that could finally give the crypto market the kick in the butt that it needs, while a negative one would likely drive the prices even lower. 

Disclosure: The author of this text owns, or has recently owned, a number of cryptocurrencies, including BTC and ETH.