Last night there was a real collapse of the cryptocurrency markets. In summary, the emergence of Coronavirus is not only alarming traditional markets, but has also affected the cryptocurrency sector like a rock.
Yesterday had not been exciting, with Bitcoin in a few minutes lost a 20% and ended with less than $ 6,000 dollars, and Ethereum close to $ 120 dollars. At 3:00 a.m. UTC +1, an additional collapse brought Bitcoin to $ 4,000 and Ethereum to less than $ 100, a loss for both between 30% and 40% of the day's value.
Then, both found a shy redemption when partially recovering the value.
But what happened in the markets tonight?
For Paolo Rebuffo, crypto market expert and founder of Deepit.ch, as well as creator of the Ethereum Inside chat and one of the first to participate in the Ethereum ICO, there are at least several reasons that led to the collapse:
“When leveraged financial intermediaries incur a significant stock market crash, they first ask clients for additional margins, otherwise they close positions in the hope that they will not generate losses. Brokers when they have a losing position have the right to liquidate other positions to clients until the margins are covered. This generates a collapse in all kinds of markets. Cryptocurrencies are interconnected with financial markets because there are derivatives and ETFs. Many people have liquidated cryptocurrencies and therefore have done it proactively to have liquidity to maintain their positions. ”
Paolo Rebuffo also analyzes what happened on Ethereum:
Ethereum had one more problem, with the total blocking of one of its most important assets, which is DeFi. Two things happened: Chainlink, provider of oracles for all Defi, fell and then Maker fell, which was basically to blame because some part of the ecosystem managed to close some CDPs that took the ether out of the interior. "
According to Rebuffo, the explanation for Maker's fault is that:
"It was an attack from someone who wanted to attack Maker, so we found out that Maker has a vulnerability now mitigated."
Consequences of the collapse of crypto markets
Also for Simon Peters (eToro) the collapse of the cryptocurrency is related to that of traditional markets, struggling with the emergence of the Coronavirus:
"The next few days will be crucial for cryptocurrencies and whether the sale has bottomed out or not. In fact, sentiment could change, with some investors tempted to buy Bitcoin, given the low prices. ”
Yesterday, Bitcoin broke the critical $ 6,000 level and investors continued to sell, reducing most crypto assets to their lowest levels for nearly a year. Currently, Bitcoin is down 12.5%, and is just under $ 5,000, with other large crypto assets following the trend. Ethereum has decreased by 6% to approximately $ 123, XRP by 6.4% to approximately $ 0.145 (the lowest level reached in the last 3 years).
This is an indirect effect generated by the massive sale that has affected traditional markets, while "refuge assets" such as gold have also lost value. Governments around the world are imposing drastic measures to contain the contagion and international authorities are working to find solutions to limit the economic impact of COVID-19. "
Yesterday, the words of the President of the ECB, Christine Lagarde, who announced a quantitative easing without changing interest rates, triggered the ptounique in the financial marketsSo much so that Piazza Affari closed with -17%.
Today the stock markets are recovering, but it is too early to draw conclusions. The cryptocurrency market, on the other hand, remains negative.