There are more reasons why Bitcoin, along with the rest of the top cryptocurrencies, collapsed starting with October 10. However, according to Brian Kelly, CEO of investment firm BKCM, the downtrend began after news and rumors that crypto exchange operator Bitfinex, one of the largest in the world, was about to suspend all deposits in fiat money.
Bitfinex is having some hardships these days after the Noble Bank decided to stop supporting the exchange and the stablecoin Tether, which has generated a loss of confidence among cryptocurrency investors. Thus, crypto holders started to withdraw their crypto funds from Bitfinex. Thus, by suspending fiat deposits, the exchange hoped to slow the Bitcoin exodus.
Another event that nourished the negative sentiment came from the International Monetary Fund (IMF), which said in a report published in mid-October 2018 that continued growth of crypto market might generate “new vulnerabilities” in the financial space.
On October 11, Nouriel Roubini, the economist who anticipated the 2008 crisis, told the US Senate Committee on Banking, Housing and Community Affairs that the crypto market was the mother of all scams and bubbles. He went even further and said that blockchain, the technology underpinning Bitcoin and other cryptocurrencies, was the least useful and most overhyped technology. This position is a bit strange given that even the most ferocious crypto skeptics are endorsing the distributed ledger technology (DLT), as blockchain is often called. He said in his testimony:
“Scammers, swindlers, criminals, charlatans, insider whales and carnival barkers (all conflicted insiders) tapped into clueless retail investors’ FOMO (“fear of missing out”), and took them for a ride selling them and dumping on them scammy crappy assets at the peak that then went into a bust and crash – in a matter of months – like you have not seen in any history of financial bubbles.”
Even though the hearing before the US Senate was held on October 11, the market reacted earlier as there was anticipated a strong criticism, especially because everyone knew Roubini was not a Bitcoin supporter, to say the least.
Even though Bitcoin together with other cryptocurrencies fell during these few days, it still didn’t update the year to date low. There might be a sideways movement for several days and weeks, and the market might revive, but it needs fundamental support. If the US Securities and Exchange Commission (SEC) finally approves one of the pending Bitcoin-related exchange-traded fund (ETF) products, the cryptocurrency would get a major boost.
Also, in the past, the market usually was bullish in the November-January period, with the trading volumes indicating more activity. We’ll see what happens, but the certain thing is that the crypto market is here to stay. It may seem to weaken now, but this is the way it matures – remember how the tech space behaved after the dot com bubble burst? For Bitcoin, it’s important to become accessible for more institutional investors through ETFs, futures, and other similar channels.