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What to Make of Bitcoin’s Mini Crash and Subsequent Revival?

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phisycal bitcoin with chips inside

Most investors in Bitcoin have been pretty buoyant over the last five months, especially as the price of the cryptocurrency has seen a real surge in the late-spring, doubling its value through the start of March to late-May. However, on 17th May a sale of 5,000 Bitcoin (approx. $40 million) on the Bitstamp exchange caused a mini crash, wiping around $10 billion off the digital currency’s market cap in the space of 20 minutes.

The price of Bitcoin recovered within a couple of days, and the narrative has picked up again that Bitcoin is enjoying a successful first half of the year. It’s hard to argue with that, but what can we learn from this mini-crash and what does it mean for Bitcoin trading? Probably very little, but there are nevertheless some very interesting takeaways.

Whales can impact crypto markets

First of all, the negative side of things. The sale of those 5,000 Bitcoin represents a significant dump, even if that does represent a tiny percentage (approx. 0.03%) of the total Bitcoins in circulation. Moreover, it also shows that ‘whales’ still retain the ability to manipulate crypto markets.

It’s important to remember that part of the very reason for Bitcoin’s existence is that it is supposed to be shielded from such manipulation – that’s a fundamental to the idea of having a decentralized digital currency. Furthermore, the dip was an easy way for critics of Bitcoin to raise questions about the cryptocurrency’s viability.

On the other hand, we can see that the market righted itself within a matter of hours. Yes, some long and short traders may have got a bloody nose on the 17th May, but some holders of Bitcoin may not have even noticed had they not checked the value of their assets over the weekend. Indeed, many investors and supporters of cryptocurrency were bullish about the token recovering its value quite quickly, and they were proven to be right within a couple of days.

Investors in Bitcoin have had an excellent few months

The ability for the market to right itself quickly after such a decline is, of course, incredibly important for those investing in Bitcoin. Many investors, including small investors, are willing to be patient with their asset, understanding that the volatility of the crypto market is inevitable. For them, as long as the lines generally go up, even if that is in a meandering fashion, then they are happy to wait months or years for their investment to bear fruit. If, after such a scare, the market picks up again, then they will be more assured of their investment’s viability.

Of course, one cannot be complacent about it. If that mini crash was caused by ‘bad actors’, then there must be a discussion on how to protect investors from such actions. That may come with regulation or further mainstream adoption, or may require a broader, more creative solution. Still, it should only register as a blip on Bitcoin’s excellent scorecard across April and May, and, indeed, most of 2019.


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