Bitcoin is right now going through a strong bullish correction as it recovers 10% after reaching the week low level of $4,200. All crypto markets are slightly recovering. Even so, we are faced with a huge $70 billion drop that happened in the entire crypto market.
Bitcoin price went under $5,000 for the very first time since October of last year. Other currencies also fell. Ethereum reached $126 and XRP maintained support. The market is moving towards a recovery but we do not know if this is going to last. This could simply be due to the fact that traders executed short positions.
We are looking at really tough times for Bitcoin and the entire cryptocurrency market. It is believed that the new huge drop appeared due to 2 important factors.
Price Manipulation Reports
The US Justice Department recently revealed that it is now investigating possible crypto market price manipulation. The claim is that BitFinex and Tether artificially pumped the Bitcoin rise that went as high as $19,000.
If it is proven that the misconduct happened and it influenced prices, it shows that crypto value can be manipulated, thus hurting the entire industry. The industry cannot prove that the demand that is noticed is real or false. This is why it is particularly important that crypto exchanges are regulated. However, if price manipulation proves to be correct, investors are going to be spooked and the entire market will have to be able to prove that it cannot actually be manipulated from this point forward.
The Bitcoin Cash Hash War
The recent Bitcoin Cash hard fork led to 2 blockchains that are competing right now: Bitcoin ABC and Bitcoin SV. Most mining pools and exchanges support Bitcoin ABC. However, the side that is now losing is simply not conceding. It is wasting network resources and forces pools to allocate a large part of their mining power to Bitcoin ABC so that it stays ahead of Bitcoin SV. This surely affected the entire market. Investors ended up selling crypto holdings, even if the US Dollar is weaker.
The current hash war will keep on going until, most likely, Bitcoin SV loses its support from some mainstream mining pools and exchanges, which is inevitable if user adoption remains low. After that, things should get back to normal. However, the impact of the federal investigation can last longer than what some people anticipate.
The good news is that absolutely all crackdowns in the crypto market are a good thing for the long run. 2019 is expected to be an important year for Bitcoin and the entire crypto market. Global financial institutions need to make their stand and regulations start to appear. As soon as clarity starts surfacing in the crypto market, investors will come back. This always happens. Fear is, however, a hard thing to counter. There are some investors that declared the death of Bitcoin but how many times did you hear that so far? It seems every single month there is one but the network is still growing.