The world of cryptocurrency is fast-paced and packed full of volatility, something which gives it such a great appeal to a lot of people across the globe. Trading and investing in crypto can lead to handsome returns in a short period of time, but holding in the event of a crypto crash can result in significant losses for traders and investors. Although, it can also present the opportunity for buying coins during a dip.
This article will discuss everything surrounding crypto crashes from when they have occurred and what the triggering factors were for these sharp drops, the likelihood of another and how you can possibly spot a crypto crash coming.
What constitutes a crypto crash?
There is no definitive figure which defines whether or not a crypto market crash has taken place. It is much like evaluating any drastic changes that may occur in the stock market. Sharp and sudden devaluations in the cryptocurrency digital market outside of the previous price trends will likely constitute a crypto market crash.
Bitcoin, is without a doubt the most well-known digital currency, and a huge decrease in the value of Bitcoin is often a good representative marker for a crash.
How many crypto crashes have occurred?
2009 marked the first decentralized cryptocurrency, Bitcoin, and as of earlier this year there were more than 9,000 cryptocurrencies in circulation.
This market has exploded and come a long way since Bitcoin was first released as an open-source software. However, there have been numerous times where crypto crashing has occurred. The following outlines when some of the most notable crashes took place:
- 2011: The first notable crash took place two years after Bitcoin was established, when the price as of June 2011 rose to US$29.58, but dropped to US$2.14 by November. This fall in price was mainly attributed to a Gawker article about the dark-web market, Silk Road.
- 2015: There was a boom in late 2013 with Bitcoin reaching a value of US$1,127.50, but a period of gradual decline eventually led to a slump of US$172.15 in January 2015. The bottoming out in the latter part of this period is thought to be down to a vulnerability to hacking attacks, with Bitstamp reporting a successful attack in early January forcing it to close temporarily after US$5.6 million of Bitcoin were stolen.
- 2017: On 17 December, 2017, the value of Bitcoin reached a new all-time high of US$19,783.06, but only five days later on 22 December the value had depreciated by 45%. The volatility and insecurity of investors and traders was emphasized through this crypto market crash when Charlie Lee, founder of Litecoin, said he was selling his holdings to avoid any conflicts of interest after it appearred the price of the digital currency was benefitting his interests. This decision caused a shockwave of fear to be spread throughout the community and lead to crypto crashing in late 2017.
- January 2018: The beginning of 2018 marked the sell-off of most cryptocurrencies. The turmoil of what 2018 had in store for traders and investors was unprecedented with saga after saga. On 12 January 2018, rumours circulated that South Korea could be preparing to implement a ban on trading digital currencies altogether which resulted in a 12% decrease of Bitcoin. 26 January was the day where Coincheck, Japan’s biggest cryptocurrency OTC market, was successfully hacked. A reported US$530 million of the NEM were stolen, causing Coincheck to suspend trading as it was the largest ever incident of theft.
- March 2018: March was also littered with incidents of controversy as the value of Bitcoin continued to slump. This month was when compromised API keys were used to carry out irregular transactions and Google, Twitter and Facebook banned advertisements for initial coin offerings (ICO) as well as token sales.
- November 2018: The market capitalization of Bitcoin depressingly fell below US$100 billion for the first time since October 2017, and the value of Bitcoin itself fell to US$5,500, a big drop off from the heights of 17 December 2017.
- May 2021: Late 2020 and early 2021 saw unprecedented rises in the value of Bitcoin and cryptocurrencies, with a value of US$64,000 in April for the former. This increase in value was short-lived as a 30% depreciation by 19 May partly occurred due to Elon Musk’s announcement that Tesla would suspend payments using the Bitcoin network due to environmental worries. This was also in conjunction with a statement from the People’s Bank of China reiterating that digital currencies were prohibited as a form of payment.
- May 2022: The Federal Reserve raises interest rates by 0.5%, leading to a market selloff. Over the course of eight days, Bitcoin dropped by 27% to a value of just over US$29,000, and Ethereum fell 33.5% to ~US£1,960. This crypto crash was also highlighted by Coinbase’s shares down by 80%.
- June 2022: June marked the unpopular announcement from Celcius Network that it was halting all withdrawals and transfers. The following day saw Bitcoin fall 15% to approximately US$22,500. Other popular crypto agencies also announced layoffs.
- November 2022: November has been dominated by the FTX story. Early on in the month, Binance announced it would be dissolving its holdings in the FTX token (FTT) due to reports that most of FTX liquidity was based in the coin itself. Within 24 hours of November 7, the price of FTT dropped 80% – US$22 to US$5. FTX later filed for bankruptcy protection on 11 November.
Will crypto crash again?
The timeline above details just some of the most notorious crypto crashes which have taken place in the short amount of time since its establishment. There are many more eventful sagas which resulted in Bitcoin and other digital currencies depreciating sharply in a close proximity time period. This emphasizes the volatility of cryptocurrency as a whole.
It is almost certain that a crypto market crash will take place again – it’s a matter of when will crypto crash, not if.
These crashes are a nightmare for investors and traders who may well be uncertain as to how long they want to hold their asset for, but it does provide investment opportunities during a dip. Staying vigilant and on top of the latest news is so important as numerous cases above show that even rumours are enough to spark insecurity and worry throughout the community.
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