The world's most sought after cryptocurrency recently went below $45,000 on Tuesday
Bitcoin is the worlds most sought after cryptocurrency and recently it went below $45,000 on Tuesday from a near four-month high of about $52,000 hours after it was launched as a legal tender in El Salvador, the first country to do so. There are other crypto’s such as Ethereum, Binance coin and Cardano which went down between 13% and 18%. On the other hand, dogecoin and Shiba Inu a crypto named after a dog-themed meme and launched to rival Dogecoin decreased as much as 33% and 70%.
This ‘flash crash’ according to the experts happened due to the shortage of liquidity in crypto markets which could give disproportionate power to large holders and also as crypto markets are led by sentiments without proper regulation. Meme coins are generally volatile and could be driven by a “buy the rumour, sell the news” philosophy. This Bitcoin situation also initiated a sell-off on the world’s largest crypto exchanges such as Coinbase, Kraken and Gemini. “Crypto markets though growing aren’t as liquid as traditional financial markets. If there is more liquidity, this [flash crash] is less likely to happen,” Shetty stated.
An Indian based full-time Bitcoin trader believes the sell-offs at sustained peaks which are a part of course correction during bull runs. “Such pullbacks are healthy for a sustained market. If something goes up continuously, it won’t create demand and supply zones and the eventual drop will be catastrophic as well,” the trader, who did not wish to be named said. Vikram Rangala, Chief Operating Officer and Chief Ohana Officer at crypto exchange Zebpay stated it as a “normal price correction after a rally”. “In thin markets, there may be fewer players to buy and sell at those intermediaries prices, so you see bigger moves,” Rangala said.