What are the reasons behind the BTC Sell-Off
In just a few hours, the cryptocurrency market shed around $25 billion as an abrupt bitcoin sell-off ensued. Bitcoin (BTC) has seen rough sledding over the month or so with a lot of uncertainty in the market…like many people were just waiting to see what would happen. Last Sunday, it did happen and it seems like a group of hodlers sold off a lot of their holding to new speculators. The coin has lost more than half its value from last year and it seems this recent sell-off from hodlers probably shifts the market into more volatility as now buyers tend to be more focused on the short-term.
However, this is not new as the recent influx of buyers are mostly those who are not long-term investors but are looking to win the cryptocurrency lottery. The supply between investors and speculators right now is about split. Since speculators tend to own fewer coins than long-term investors, bitcoin wealth is less concentrated than it was prior to 2017. Of course, they also tend to be less-inclined to hodling, which means that it will take more demand to move the price needle in a positive direction than in the past.
Another reason for the sell-off might have to do with the hack at Coinrail in South Korea. Coinrail’s statement said officials took the exchange offline and moved the remainder of its assets to cold storage as officials review the security system and work with law enforcement to investigate what happened. The statement made no mention of if or how the exchange might reimburse customers for the losses. Coinrail said it has frozen all exposed NPXS, NPER and ATX coins and other cryptocurrencies are now being kept in a cold wallet.
Seoul has become an important epicenter for crypto, but has also been the scenery for some of crypto’s biggest hacks. Bithumb, also in South Korea, was hacked allowing 32,000 users data to be compromised. This allowed hackers to log into user accounts and start transferring funds. A few months later, in December, another exchange, Youbit, lost around 4,000 Bitcoins — some 17% of its assets.
While the potential Coinrail hack is unlikely to be on the same scale as either of last year’s breaches it will shake the confidence of many potential Bitcoin investors at a troubled time for cryptocurrencies.
The recent hack is not good for the price of BTC as it has already been trying to find a floor as fears continue about regulatory concerns.