Nobody likes Mondays, and it’s even worse to wake up to a market downslide. But that’s exactly how the week started for crypto traders, after a weekend of continuous losses.
The market fell roughly 12% since Saturday evening, falling to a low of just over $270bn Sunday night: a far cry from the $357bn high point last Wednesday. It’s the largest drop since late June, when total capitalization slid 20% in just over a day.
Mainstream and industry news sources were quick to seek easy explanations. The favorite so far is that a Trump tweet precipitated the drop, causing markets to panic. On Thursday evening, the President criticized Facebook’s proposed currency and declared that he was “not a fan of Bitcoin and other [c]ryptocurrencies.”
I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity….
— Donald J. Trump (@realDonaldTrump) July 12, 2019
CNBC was first on the scene. After tentatively declaring that although the cause of the slump “wasn’t immediately clear,” the outlet speculated that the Trump tweet and the pullback were somehow connected.
FT Alphaville’s Jemima Kelly, crypto’s number one cheerleader in the mainstream press, went further, writing that what started as a “Trump bump” – the market surged by $8-9bn following the tweet – had now turned into a “Trump slump.”
But hold your horses: a quick look at the charts shows the market had been sliding since Wednesday afternoon, at least 36 hours before the president tweeted. By the time Trump shared the tweet, at 6:15 EST, the market had already lost $50bn of market capitalization: more than the decline which followed.
For experienced traders, it was no surprise that prices fell, especially after the breakneck run-up to $13,000. “Everyone I know who trades bitcoin,” explained Hassan Hassan, Director of Bluefield Capital, “was expecting a pullback even before the comments were tweeted.”
Trump’s comments might have dissuaded some investors from entering the space, but Hassan believes that most movements in the market are the result of large investors, who are trading between assets and disproportionately affecting spot prices.
“The market has been cooling down since the peak on June 26th,” explained Mati Greenspan, senior market analyst at eToro. Trading seems to have begun to stabilize, with signs of a slight recovery to around $280bn.
“After a failed breakout attempt last Wednesday, it’s safe to say that we’re in a range now,” Greenspan added. “Looking at the charts, I see no reason to assume that the Trump tweet has had any significant impact on prices other than the initial reaction.”
As with any pump, there are cycles where resistance levels are tested and pullbacks occur, Hassan noted. A higher milestone price could attract additional investors, pushing prices still further.
Trump slump might only be a temporary blip.