Bitcoin had been relatively stable for weeks, but it suddenly dropped to its lowest level in two months yesterday. The largest cryptocurrency by market capitalization was trading for $26,060 per coin at the time of writing, down more than 11% in the past seven days.
The crash was likely caused by a combination of factors, including uncertainty in the wider economy and low liquidity in the Bitcoin market. As the price of Bitcoin fell, it triggered a cascade of liquidations, where traders were forced to sell their positions due to margin calls.
It is still unclear who caused the crash, but it is unlikely to be due to any major news or events. The market is simply becoming more volatile as it matures, and these types of crashes are becoming more common.
Here are some of the specific factors that may have contributed to the crash:
•Uncertainty in the wider economy. The global economy is facing a number of challenges, including rising inflation and interest rates. This uncertainty has led to investors becoming more risk-averse, and they have been selling off riskier assets like Bitcoin.
• Low liquidity in the Bitcoin market. Liquidity refers to the ease with which an asset can be bought or sold. When liquidity is low, it means that there are fewer buyers and sellers in the market, which can make it more difficult to sell an asset without causing the price to fall.
• Cascade of liquidations. When the price of Bitcoin started to fall, it triggered a cascade of liquidations, where traders were forced to sell their positions due to margin calls. This selling pressure further exacerbated the crash.
