Why did Bitcoin's price drop almost 50%?
Bitcoin's recent price drop has been described as one of the worst thrashings in months, meanwhile, the rest of the Crypto-world is sitting tight.
In fact, when looking at the BTC price chart, we can see that it has mostly correlated with the stock market.
Among others, crypto-market research firm Coin Metrics has attempted to decode the whole debacle and have arrived at the conclusion that short-term holders of Bitcoin are most likely the biggest contributing factor in this case.
In its latest State of the Network report, Coin Metrics stated that long-term Cryptocurrency holders have chosen to remain on the sidelines during this crisis, and that coins held for 12 months or less were responsible for driving down the price.
The short-term holders were reportedly selling their coins at a loss.
Bitcoin price drop
The report also highlights the fact that the market value of Bitcoin compared to Realized Value (MVRV), dropped under 1.0 on March 12th, experiencing the biggest drop since 2013. They explained:
an MVRV above one can signal that speculators have a higher average market valuation than holders. An MVRV below one, on the other hand, can signal that holders have (or had) a higher market valuation than current speculators.
Speculators now value Bitcoin less than holders, and this could be a potential indicator that the leading Cryptocurrency is moving closer to bottoming out.
The effect of Coronavirus on Bitcoin's price drop
Coronavirus (COVID-19) is affecting everyone and everything in the world at the current time, not just Bitcoin. However, it seems to be an indirect effect of Bitcoin's drop. As mentioned, investors putting their money into stable coins and other assets due to the current volatility of the Crypto market is most likely the cause.
The effect of Coronavirus on the price of Bitcoin has been observed in conjunction with the stock market, and there are clear correlations. It's fairly simple: The world is in a state of quarantine which means less trading, buying, and selling in general - not just in the Crypto-sphere.