Bitcoin has been on quite the rollercoaster since its all-time high peak in December of 2017. The drop, which accelerated throughout January and culminated in reaching a low of $5,900 before bouncing back up to ~$8,000 for much of the remainder of February. Just as February came to a close, bitcoin started to fight back, reaching key resistance levels at $11,750 only to be rejected. This week, steam started to pick back up and a retest of this key area was yet again rejected, except this time, it rocketed downward in a crash that has spooked much of the cryptocurrency community and has held any indication of a new bull run to a screeching halt.
In late January until the big February crash, there was an endless supply of negative press related to cryptocurrencies, including government bans, Korean exchanges being delisted from CoinMarketCap, and more. However, since the CFTC and SEC commission where the US committees announced a “do no harm approach” to cryptocurrencies. The sentiment seemed to change immediately, which prompted Bitcoin’s end of February climb into March.
Today, though, was a perfect storm of bad news and FUD (fear, uncertainty, and doubt) that was a likely cause of Bitcoin dropping nearly $1,000 in value in a little more than an hour.
Crypto: The SEC Won’t Let me Be
The U.S Securities and Exchange Commission (SEC) released a public statement today, calling cryptocurrency exchanges “potentially unlawful online platforms for trading digital assets.” In the statement, the SEC calls out the fact that many cryptocurrency assets meet the definition of “securities,” and because they do, exchanges must register with the SEC.
Most cryptocurrency exchanges such as GDAX aren’t registered with the SEC and instead operate using money transmission licenses. To be fully compliant with SEC guidelines, exchanges will have to register and then be put under close scrutiny under SEC inspections and other requirements. Those that do not register with the SEC, could be sued or shut down. Or both.
What this means for exchanges is yet to be seen, but changes are coming and speculators were clearly unsettled by the news.
Binance API Issues Cause Market Issues
If the SEC asserting their control over exchanges wasn’t enough, there was also fear over a Binance hack that caused widespread selling of funds – selling that wasn’t initiated by users. Many of Binance’s customers took to Twitter and other communities to inquire about why all of their altcoin holdings were sold and converted to Bitcoin. One Reddit user wrote:
WTF is happening! Binance just sold all my alts at market rate and I have got just the Bitcoin now. Is it because of account getting hacked or binance bot issue? Have raised a ticket 715903 for this. Edit: Binance has started reversing transactions now. I see Bitcoin back on my account.
Users panicked believing Binance was hacked.. Binance CEO Changpeng Zhao explained the selling as “irregularities in trading activity” and Binance has since reversed all the unauthorized trades.
Mt. Gox Crashes Bitcoin Again (and Again)
A little over five years ago, the most prominent bitcoin exchange at the time, Mt. Gox, halted all bitcoin withdrawals, and then suspended trading. It was later revealed that Mt. Gox was hacked, resulting in millions of dollars in bitcoin being stolen from its customers and their own reserves. Fast-forward to today – it has been revealed after a Mt. Gox creditor meeting earlier in the day, that a trustee who holds Mt. Gox’s recovered bitcoins has been selling them off at market rate since September, and may have been responsible for selling large amounts of bitcoin – enough to effect market price – that prompted some of the biggest drops in bitcoin’s price in 2018.
While creditors are mostly paid off due to this trustee selling off the bitcoins at an average of $10,000 each (meanwhile claims stemming from Mt. Gox only equate to the fiat equivalent of $400 per bitcoin), but over 165K bitcoins still remain in this trustee’s possession, prompting fears of additional selloffs that will increase bitcoin’s volatility. and drive prices down further.
Reddit users are already speculating the likelihood of the Mt. Gox trustee being responsible for the market crash in February, in addition to the drop from the all-time high, among more drops following in January. Thanks to the blockchain, there is some validity to the claims, with addresses tied to the Mt. Gox accounts moving significant amounts of bitcoins on December 22, January 17 and 31, with the largest dump of 18K BTC being on February 5 – which coincides with the market crash.
Where Do We Go From Here?
In summary, today’s drop concludes that the bears are still in control, and that market sentiment around cryptocurrency is at a recent low, despite cryptocurrency being such a trendy buzzword, it was just added to the Merriam-Webster Dictionary. Where the market goes next is anyone’s guess, but unfortunately the SEC’s tightening grasp on exchanges, potential for exchange hacks, and the remaining 166K BTC in this trustee’s control aren’t going anywhere… yet.