The cryptocurrency market suffered from a large flash crash yesterday, with countless major coins and tokens seeing a sharp price drop of over 15%.
While these prices have rebounded slightly as investors bought the drop, the global market cap has still decreased by 10.30% in the past 24 hours, according to CoinMarketCap.
So, what exactly happened?
Crypto Damage Report
After starting the day at over $51,000, bitcoin’s price fell to a low of $44,672 – its lowest price since mid-August.
Most other coins felt this impact, too. Ethereum fell from $3900 to a low $3127. Cardano dropped to $2.162 – down from $2.82 at the start of September 7.
The crash also saw several of the major cryptocurrency exchanges become overwhelmed. Platforms went down yesterday, frustrating those users attempting to access their assets.
Prices saw a small increase following the crash, with bitcoin appearing to settle near to the $46,000-$47,000 mark. At the time of writing, BTC is priced at $46,211 and ETH costs $3359.34.
It was also initially thought that Solana – the coin that has seen a dramatic rise over the past month – was able to survive the crash after quickly bouncing back up. However, after the initial post-crash price increase, SOL’s price has steadily declined, dropping 10.15% in the past 24 hours. It remains up 46% in the past 7 days.
What Caused The Crypto Flash Crash?
While there is no way to definitively attribute the cryptocurrency crash to any one event, analysts have noted several events that may have been responsible.
The first concerns El Salvador’s adoption of bitcoin as a legal tender. While some noted the issues with El Salvador’s Chivo wallet, author Jason A. Williams pointed to the ‘buy the rumours, sell the news’ phenomena. On the day El Salvador finally accepted bitcoin, traders cashed out.
Highlighting the near $3.6bn in liquidation, Market Rebellion’s co-founder Jon Najarian suggested overleveraging may have been responsible for the crash.
Leveraging sees traders borrow capital to potentially amplify their profits (or losses) if they don’t have the money to invest this themselves. However, as Coindesk states, margin calls saw a huge number of auto-liquidations that led to sell-offs.
There are plenty of other, more conspiratorial theories surrounding the crash circling on social media sites. However, as we near the launch of Cardano's smart contracts and Ethereum 2.0 but all eyes will now be on the recovery.