Bitcoin flash crash is not accidental? Analysis says that bitcoin network activity slows down
Just as bitcoin (BTC) prices were "boring", the rapid sell-off caused by a flashback had caused Bitcoin prices to lose as much as $500. Byte Tree CEO James Bennet said that this sudden drop in prices is the result of a significant drop in network speed.
Bitcoin flashes down and drops hundreds of dollars in a few minutes
BTC prices fell above $8,000 for a few days, and a flash crash occurred on Wednesday night, with BTC prices falling below $7,400.
This caused the BTC's decline to exceed 9%. As of press time, Bitcoin prices temporarily stabilized above $7,400, with a 24-hour drop of 7.38%. This is a serious downturn, as Bitcoin's daily volatility generally rarely exceeds 5%. For BTC, this is one of the most dramatic price changes since September 23, when the Bakkt exchange was officially launched, and bitcoin prices fell from $10,000 to $8,000, when prices stabilized for some time.
A recent flash crash occurred after a period of bitcoin trading and slower value transfer. James Bennet, CEO of Byte Tree, believes that falling prices are the result of slower network activity.
In the past few weeks, the speed has been significantly slowing as transaction volumes move to stable currencies like Tether. In the end, the sluggish demand for the Bitcoin network has caused recent price declines.
“Network speed is a tracker of how active each BTC is in the economy. Historically, speeds below 600% translate into market troubles.”
BTC activity slows down
At present, USDT's activity has exceeded BTC, which means that the market is largely dominated by stable currencies. CoinMarketCap data shows that BTC accounts for approximately 29% of all cryptocurrency transactions, while USDT typically exceeds 35%. The Bitcoin network itself has different values every day, and the volume of transactions fluctuates between $300 million and $1 billion per day.
A few hundred dollars in decline is not uncommon for Bitcoin, especially when the volatility intensified in October. But falling to $7,400 also means that the new test will bottom out. BTC is currently looking for directions, but long-term corrections are also possible.
On Monday, the Bitcoin whale monitoring robot noticed several large bitcoins entering the exchange, which may signal selling pressure. But the actual downside pressure did not appear until Wednesday crashed.
A few days ago, the BTC also carried out a relief rally, approaching the $8,300 level, which made the current price loss look even worse. Bitcoin’s fear and greed index immediately fell from a steady 41 points to 33 points (fear) for most of last week.
To maintain a position of $8,000 before halving next year, it will cost $2.88 billion.
According to Tuur Demeester, founding partner and commentator at Adamant Capital, Bitcoin must attract a huge net demand of $2.88 billion if it wants to maintain its $8,000 price before the Bitcoin block rewards are halved next year.
In a tweet, Demeester pointed out that under the current 12.5 BTC block award, to keep the price of bitcoin at $8,000, the demand will need to reach $100 million per week.
“Calculation: 144 blocks/day × 12.5 btc / block × 8,000 USD × 200 days = USD 2.88 billion”
"To keep BTC at its current price of $8,000 until halving in May 2020, we may need to see a net positive demand of $2.88 billion before that."