Steep price declines are nothing new for bitcoin, but when the price of BTC plummeted by more than $600 on Wednesday, analysts across the internet were more than a little surprised. The bulk of the 7% price decline took place over the course of an hour — the fall from $10,270 to $9,780 taking only about 40 minutes — with a slower sell-off lasting into the next morning. What happened? No one really knows.
Almost immediately after the price started falling, however, the internet was abuzz with dozens of theories, some more conspiracy-minded than others. It’s worth noting that BTC’s price actually fell by far more than this just a few weeks ago — $11,250 to $9,700 — over a two-day period, and such major price movements are relatively common in cryptocurrency trading. The suspicious element many cryptocurrency pundits have focused on is the steep, sudden drop. Is someone out there trying to sink BTC? If so, who are they and why did they do it?
The real answers are probably not very exciting — again, this kind of thing happens all the time in cryptocurrency trading — but wild speculation can sometimes be entertaining in its own right. In this post, we’re taking a look at seven crazy (and not-so-crazy) theories about the recent price drop.
1. French Botnet Hackers Cashing Out: Earlier this week, French law-enforcement broke up a massive Monero “crypto-jacking” botnet, but failed to recover the stolen funds. Perhaps the thieves exchanged their XMR to BTC, then sold it all off? Apart from the timing, however, there’s no evidence connecting the two events.
2. Flooded Chinese Miners Selling Off: Torrential rains in China’s Sichuan province have caused serious damage to the region’s many cryptocurrency mining farms over the last few weeks, burying at least one under a mudslide. Could one of those miners be selling off their BTC to rebuild their facilities and buy new equipment?
3. Fears About “Faketoshi” Craig Wright Liquidating His BTC Reserves: Self-proclaimed bitcoin inventor Craig Wright was handed a serious courtroom loss earlier this week, with the court awarding 50% of his BTC holdings and other IP to the estate of his former business partner Dave Kleiman. (The court also found that Wright had perjured himself, submitted false evidence, and argued his case in bad faith.) If Wright is, as he claims, the “real” Satoshi Nakamoto, he would theoretically control around 1 million BTC. Selling of 50% of those hypothetical holdings would crash the market if sold all at once, and perhaps one of Wright’s believers decided to sell off their BTC before the rush.
4. Burning Man Caused The Crash: With many Silicon Valley tech leaders — including many bitcoin entrepreneurs — attending the Burning Man festival this week, the low volume of BTC trading resulted in a “flash crash.” Automated trading bots, the theory claims, mistook low trading activity for a floundering market. A variation on this theory asserts that tech leaders and traders taking early Labor Day vacations are actually to blame.
5. CME Futures Expiration: Several bitcoin futures contracts at the Chicago Mercantile Exchange (CME) were set to expire on Friday, August 30, prompting speculation that some investors had cashed out their BTC holdings in order to settle those contracts. This appears to be the most plausible explanation for the drop, with major financial news outlets such as Bloomberg supporting the theory.
6. Bitmain Selloff To Pay For Massive Mining Chip Order: Chinese mining hardware maker Bitmain is reportedly planning to increase their mining capacity by 50% over the next few months, ordering 600,000 new ASICs from a chipmaker in Taiwan. Those mining chips aren’t cheap, and it’s possible that the company sold off a portion of its BTC reserves to pay for them. Of course, this theory doesn’t explain why a trading-savvy firm like Bitmain would crash the price by selling them all at once.
7. Recession Fears, Trade Wars, And Hedge Funds: Many experts believe that the U.S. is on the verge of entering into a new recession thanks to the ongoing trade war with China. The stock market has certainly seen some real instability in recent weeks, and the traditionally safe bond market has looked increasingly shaky as well. This may be prompting cryptocurrency-holding institutional investors to look for a less volatile places to keep their clients’ cash. According to this theory, a single hedge fund liquidating a small portion of their multi-million-dollar BTC holdings could easily cause a $600 price drop.