Unprecedented 50% Daily Bitcoin Drop Puts Entire Market in Question

Although Bitcoin and other digital currencies are known for volatility, the scale and speed of the market-wide crash makes it difficult to imagine how investors can ever return. Prices did bounce hard from their ultimate lows, but it’s still much too early to tell if market confidence is irreparably damaged at this point.

Crypto Crash Leaves Market Shattered

Thursday was absolute carnage in the cryptocurrency industry. With Bitcoin prices plunging around 50 percent at their lowest point, and other digital assets faring worse, the recent nose dive is arguably the worst in the history of cryptocurrency. In fact, as investor and former Tinder CPO Brian Norgard pointed out, the pace of the plunge makes it the most destructive crash of any market in living memory:

No one alive has ever seen a market like this.

— Norgard (@BrianNorgard) March 12, 2020

The dramatic plunge amid increasing global economic certainty is not a good look for Bitcoin. As industry reporter Larry Cermak highlights, many investors were sold on the idea that the digital could would serve as an uncorrelated safe haven.

Ethereum is down by 34% in the last 5 days. Bitcoin is down 21%. Now imagine anyone actually investing because they thought they could hedge the macro uncertainty. This is devastating pic.twitter.com/VuGZiRROH1

— Larry Cermak (@lawmaster) March 12, 2020

A narrative had emerged that scenarios like the coronavirus spread, a US President consistently urging negative rates, and a sudden breakdown in oil prices leading to a global market meltdown would be the kind of catalysts that would take Bitcoin “to the moon.” The evidence strongly suggests it was wrong.

Can Bitcoin Investors Forgive and Forget?

Bitcoin is certainly no stranger to dramatic crashes. Its history is littered with huge swings that would make most Wall Streeters tap out. However, its current plunge did not follow a massive move to the upside. Coinciding with events that call into question “digital gold’s” entire value proposition for many, the true damage to investor sentiment remains to be seen. Somewhat encouragingly at this trying time, Bitcoin prices did rebound pretty hard after the free fall. Economist and trader Alex Krüger drew attention to the extremity of both the crash and subsequent bounce:

In 2019 $BTC went from $3000s to $5000s in 1 week.

In 2020 $BTC went from $3000s to $5000s in 1 hour.

— Alex Krüger (@krugermacro) March 13, 2020

Despite the insane volatility, it seems unlikely that this really is the beginning of the end of cryptocurrency. The level of innovation and interest surrounding the industry had been growing exponentially. Those most committed developers will surely soldier on, improving user experiences and working toward the decentralized financial future they imagine. As BeInCrypto reported, the recent crash may in fact lead be a prolonged period of accumulation, possibly allowing savvy investors to pick up cheap Bitcoin once again.