There has been much debate lately regarding whether the cryptocurrency market is immune to traditional stock market movements.
Now it would seem that question may have become even more convoluted. At around 3 am GMT, when Asian countries were waking up, the crypto market dropped significantly, losing $13 billion within an hour. This follows closely on the heels of yesterday’s U.S. stock market decline which shaved over 800 points off the Dow Jones. The market closed just under 25600, down from an opening above 26400. It’s the sharpest decline in 8 months, although admittedly minor compared to the volatility experienced in February this year.
While cryptocurrency markets never actually close like traditional markets, they are still heavily affected by sleep patterns. So why did the cryptocurrency market crash when Asia awoke and is it related to the U.S. market slump?
For a long time, crypto volatility has been blamed on ‘whales’ moving assets but recent research from Chainalysis suggests this isn’t necessarily the case. Although there does appear to have been a movement of 22,100 BTC just before the dip.
Some technical analysts believe Bitcoin (BTC) may have been oversold and was in a false breakout but it hardly explains such a significant and sudden collapse. Bitcoin is down almost 5 percent whereas most other cryptocurrencies are down 10 percent or more. Off the top 20, only Dogecoin (DOGE) is doing better than BTC, with a 3 percent decline.
The U.S. market slump was reportedly driven by a loss of confidence in tech stocks backing products that largely originate in Asia, so it’s possible this could have had a knock-on effect. Crypto mining hardware companies have had a tumultuous few months, facing declining profitability due to increased hashrate difficulty and lower asset value.
Whatever the reason, the U.S. stock market decline is likely to continue today when markets reopen so it will be interesting to see how the crypto market reacts.
Bitcoin is currently trading at $6245 down from almost $6600, Ethereum (ETH) has dropped below the $200 mark, XRP is down to $0.40 and Bitcoin Cash (BCH) is at $448. Stellar, EOS, Litecoin, and Cardano are all down approximately 10 percent each.