A series of cryptocurrency exchange outages in conjunction with over-extended leverage led to a day of wild trading. The price of bitcoin swung more than $3,000 in 24 hours, after increasing more than 50% in value over the last week.
Cryptocurrency Exchange Outages Pave Bitcoin’s Fall
Major US-based exchange Coinbase experienced an outage just as the bitcoin dip was approaching its zenith. The exchange received a series of blackout reports via Twitter, and finally issued an official statement claiming that they were investigating the issue.
The price of bitcoin plunged during the hour that Coinbase was down, losing more than $1,400 in value and at one point reaching a low of $10,400 . A Coinbase spokesperson told CNBC the exchange was forced down “for a short period of time due to high volume.”
— MarketWatch (@MarketWatch) June 26, 2019
Robinhood’s Crypto division also experienced an outage during the peak in volatility for bitcoin. The exchange, which offers fee-less cryptoasset trading via its mobile application, posted the following to its status page,
“Robinhood Crypto is currently experiencing degraded performance. Our team is working to investigate and resolve this.”
The cryptocurrency community was outraged by the series of exchange blackouts, with some speculating there was a coordinated effort underway,
— Cam (@camerongrey) June 26, 2019
Others took a more optimistic view, claiming that the excitement for bitcoin buying led to exchange overload,
You know it's a bull season when coinbase (literally) breaks.. #BitcoinIsBack
— mike (@mike80202536) June 26, 2019
Too Much Leverage In Crypto Markets?
A series of analysts weighed in on CNBC to discuss the sudden downturn in valuation for bitcoin. Michael Moro, CEO of Genesis Global Trading, called the market correction natural for an asset gaining 50% in one week,
“Even the most optimistic crypto bulls would tell you that a 50%+ move in a week is too much too fast.”
Moro also blamed the abundance of leverage in the crypto markets for contributing to the massive volatility.
“The presence of leverage exacerbates the moves in both directions and affects the speed dramatically. Of course bitcoin has a history of doing this (both upward and downward), but it’s hard to call the magnitude of the move healthy.”
Leverage allows users the ability to borrow money and make trades larger than what they would normally be capable of. It’s become a popular feature in crypto derivatives trading, with exchange Bitfinex set to launch a 100x leverage product in the coming weeks.
CNBC regular Brian Kelly also maligned the danger of too much leverage, stating that the rising price for bitcoin led to more expensive borrowing, making it harder to trade long on the currency.
Mike Novogratz Weighs In
Mega-bitcoin bull and Galaxy Digital Holdings CEO Mike Novogratz also weighed in on the state of bitcoin’s price. He told CNBC’s Squawk Box that Facebook was the catalyst for bitcoin breaking above $10,000, saying that the vote of confidence was drawing institutional investors,
“One of the largest companies in the world said we believe in cryptocurrencies. If you’re an institutional investor who’s getting close and still worried about investing, it makes you that much more confident.”
Novogratz predicted that the price of bitcoin would trade in a range between $10,000 and $14,000.