The sudden decline in Bitcoin value today could be because of a significant drop in network velocity, said Byte Tree CEO James Bennet.
The flash crash wiped away up to $500 from the pioneer cryptocurrency, as investors engaged in rapid-fire selling. The loss happened within minutes and saw BTC price reduce from $8000 to $7769.90. For the last few days, the price has been on the downward mode and today’s flash crash only worsened the situation. As of 2:35 GMT, the BTC price was racing down to $7540.
The leading cryptocurrency now loses 8.70% of its value daily, which is a significant downturn. For Bitcoin, this marks one of its dramatic price shifts since September 23 at the launch of the Bakkt exchange. During that time, the price shifted from $10000 to $8000 where it rested for a while.
Flash Crash Was Because of Network Velocity Issues
On the recent flash crash that happened today (Wednesday, October 23), low network speed could be the most probable reason.
According to Byte Tree CEO, James Bennet:
“Velocity has been slowing significantly over the past weeks as transaction volume moves over to stablecoins such as tether. Ultimately, this depressed demand for the bitcoin network has lead to this recent drop in price. Network velocity is a tracker of how actively each BTC moves through the economy. Historically, a velocity under 600% translates into market trouble.”
Slow BTC Activity
BTC seems to have slowed down compared to that of stablecoin USDT, which has increased. This simply means that the current market situation favors the stablecoin. Of all crypto trading happening presently, BTC takes up about 29%, while USDT takes up more than 35% according to data from CoinMarketCap. Besides, the BTC network carries a different value each day with fluctuating trading volumes between $300 million and $1 billion.
All the same, it’s not unusual for BTC to lose a few hundred dollars, especially at a time when volatility is up. However, the plunge to the $7700 mark implies a new test for the leading digital asset to create a bottom. The status of BTC is seeking direction, but the crypto community expects a prolonged correction.
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