Bitcoin Crash: What Was Behind the Crypto Collapse?

Ups and downs are normal movements of the assets traded in the financial market. Some sideways movement, patterned formations, and structural analysis are metrics and nomenclature for analysts dealing with the same. 

Bitcoin as a leading tradable financial asset with a daily volume that ranges between $15 billion and $40 billion, once had an all-time high for its trading volume at about $140 billion plus futures volume trading. Following this height in Bitcoin’s trading volume was a sharp drop of about 43% draining the market of liquidity in less than 24 hours. 

Also read: 3 Crypto Scams That Could Cost You Thousands

A sudden drop in the price of Bitcoin in a 24-hour trading volume is often regarded and defined by market analysts as a crash in Bitcoin or a fall in the market. Bitcoin has a dominance that currently stands at 48%, and thus a spike or tank in Bitcoin’s price action affects/influences the entire crypto market.

There have been over six market crashes in the past from the inception of Bitcoin in 2009– and beyond the technical analytical factors, there are also other reasons which fundamentally form the basis for a  crash in Bitcoin. This article aims to take cues from some of these major crashes and highlight what was behind these crashes in Bitcoin.

The Genesis Crash

The first crash that Bitcoin suffered after its launch by Satoshi Nakamoto in 2009 was immediately after Bitcoin traded into its all-time high of about $32 at that time. This happened in 2011 and of course, there are a series of scenes that formed this crash causing the market to plummet.

This crash remains the harshest of all crashes sending ripples of disbelief to investors as Mt.Gox’ (The leading crypto exchange) security got breached and sizable units of $BTC (About 850,000 units) were stolen. 

From a price of $32 in less than 2 weeks of trading in June 2011, it sharply went to $17 and then kissed $1 and went as low as a penny for one $BTC. 

This drawdown accounts for about a 99.9% loss in the price of Bitcoin from its high. Even though the market recovered quickly to $1, it was a bad omen for recent investors who had little or not much information about Bitcoin’s price actions and analysis. 

The Adoption Crash

The year was 2013, after surviving the previous crash and leading rounds in headlines and major news outlets, Bitcoin began to gain more reactions and draw the interest of the populace. The Adoption and craze that came with those times coupled with investments spanning the entire globe (And new inputs from Asia and African investors), Bitcoin soon rose to another all-time high of $1150 in the Q4 of 2013—and sustained this high into the new year (2014).

From 2014 to 2015, the Bitcoin volume dropped massively as a result of this crash following this adoption. 

So the Adoption brought a pump, but also a crash which was directly traceable to the Chinese introducing a certain regulation that prohibits local banks from engaging in transactions that have to do with Bitcoin. This further drove the price way below $200 to a low of $170 in January 2015. At this point, Bitcoin was down 83%.

Fuds and Fintech-Induced Crashes

After a sustained bear market comes the recovery, which occurred after the 2015 bear market. The Pump pushed Bitcoin to successive all-time highs (ATH) of $20k in 2017, $63k in Q2 2021 and $69k in Q3 2021. In between these “Pumps” were seasons of crashes. We had the renowned “Crypto winter” in 2018 plummeting Bitcoin from its new ATH (Of $20k) to a low of $3.2k in Q4 of the same year. Factors responsible for this were quickly tied to Coincheck (A crypto exchange) which was hacked and over half a billion USD stolen and crypto restrictions from Tech companies and US policies. 

Fear Uncertainties and Doubts were the major highlights sandwiched with negative news – such as China’s crackdown on Bitcoin local mining farms. 

After topping $69k in November 2021, Bitcoin seems set for another tide of dust-biting. It had lost about 80% from November 2021 till December 2022 having hit an assumed bottom of $15k. A series of events occurred driving fear into every crypto investor. Starting from the melting down of the Terra (LUNA) Empire (In which its stablecoin $UST got depegged in a day losing billions) to a crack in FTX and other VCs plus the repeated filings for Chapter 11 (Liquidation and bankruptcy) of crypto exchanges and startups – ripples were sent to everyone’s spine!

We had Silicon Valley Bank and Silver Gate scrambling for survival in Q1 2023, following the instability that these losses onboard amid the peak of inflation. It was a crash engineered by FUDs and FOMOs of all sorts. 

Frequently Asked Questions.

Must There Always Be a Crash in the Bitcoin Market?

Perhaps, yes! From an analytical perspective, as much as there is a need for a rise/pump, so also is the need for a fall/dump. More selloffs or crashes—a sharp/sudden drop in price—are often induced by some news or fears. Trading is psychological, humans are emotional, and the market would have its end goal met (I.e. natural rise and fall in prices), so the crash is a means to the end. 

Is It Possible for the Market to Crash without Any Fundamental Events Triggering It?

Having scanned through the history of Bitcoin crashes, it is safe to say that the repeated cycles have proven that every crash in the Bitcoin market has an underlying fundamental event inducing or sustaining it. It appears impracticable for the market to suddenly crash without a cause. 

Can There Be Downtrends without Crashes in The Market?

Yes, this also is a possibility. After every successful bull run, it is natural for the market to enter a downtrend – which is often progressive and could take a while for effective correction. Crashes in Bitcoin market archives, this in a sharp and faster way, leveraging news and other fundamentals.