A mixture of all kinds of news over the previous weekend has sent the prices of cryptocurrencies substantially lower than their recent record values. The same selloff included the bitcoin BTC token as well. Behind it was one major piece of news where Turkey decided to ban crypto on its territory – in a fashion. However, the negative news reverberated through the regional and global crypto markets, adding a hefty dose of fear and uncertainty to the same space.
These feelings then made their way through social media, adding a bit of the same tone to all crypto markets and all countries. It did not take long for the same social media to spin their one version of the selloff that was clearly beginning. Among them was a big rumor about the potential crackdown in the US that is related to crypto trading and money laundering. This rumor found traction instantly and quickly thereafter, the prices began to slide down ever stronger and with a lot more mainstream media attention. The prices went down around 10 percent across the board in only hours but once again showed that the level of maturity in the crypto market is still relatively low when compared to other domains of traditional financial domains.
Some analysts called the event of the weekend between April 17 and 18 the perfect recipe for a strong market meltdown. All of the needed theoretical elements have been in place for this to happen. The first one is a very dubious tweet that comes from a US investigation that is not confirmed. It states that several institutions in the financial domain used crypto to launder funds. People quickly confirm that the report did not come from Reuters or Bloomberg, which are often on the frontline of these developments.
It also did not come from any news service with any reputable traction. Yet, it spreads like wildfire in the crypto realm and gets retweeted hundreds of times, like things, usually done in fields of esports, social media, and anything firmly rooted in the modern-day and age. Thousands of individuals, including some heavyweight express and financial professionals, weigh into the discussion. Additional pieces of news quickly fall into place of this warped narrative.
India Crypto Ban and Other Rumors
A major boost to the developing rumor in that particular moment is a tweet from CNBC. It showcases a month-old report from Reuters about the expected ban of cryptocurrency use in India. Less than an hour is what it takes from these two streams of information and social media chatter to blend into one doomsaying storyline. Of course, the story is both old and in brewing for years now, but that made little difference.
Grafted to this were the tweets that showcased how the CEO of Coinbase sold most of his stock during the listing of the same company. The same is completely incorrect as he sold only 1.5 percent of his entire holdings. However, by that time, the rumors have been both marinating and placing each other on top of other fears of a market slide into drastically lower values.
All of this took place in an environment that is filled to the brim with relatively new investors who are both inexperienced in the crypto field and also more or less clueless about the ways that cryptocurrency networks work. These individuals did help the market reach new incredible price records, but at that point, became a drastic liability to the market movement. They had a range of bad news to consider, some of it, like Turkey’s ban, very factual. When they did, they concluded that a massive meltdown has to be in the cards and ready to go off at any moment.
On the other side of this equation was the fact that joke cryptocurrency networks, like that of dogecoin, managed to reach insane values. That too, following the common wisdom of having a structure of finance that is quickly overheating, pointed towards an inevitable fall of prices. Many of them decided to act and sell their assets, usually with some level of profit if they entered the markets at the right time. But, this also created a wave of panic that quickly spread throughout the space and led to a drop of 10 percent almost across the board.
There is no doubt that many recently active traders left the market at least in the short term, many other veteran investors did not budge because of this development. Long-term holders of cryptocurrencies know that a 20 percent drop is nothing that unusual and even in the present bull run, these occurred several times in the previous months.
Also, pundits and other experts usually take any weekend moves with a lot of salt, knowing that the level of liquidity in those periods is low. This especially goes for Asia and its crypto markets. Instead of panicking, these individuals and funds they represent decided that this is only something that is otherwise very familiar to all crypto investors – sudden and strong movements that usually fizzle out under the exposure of the more persistent and strong market influences.
The move from Ankara which limits – not bans completely – cryptocurrency dealings is by no means good news for the markets. They did react to a point in the right manner, allowing caution and hesitancy to exchange the otherwise very present optimism and bullish sentiment. But, they did not move beyond what ended up as a cycle of fear and inexperience. It, not the news, resulted in the move and the actual drop.
That part did not come from the calculated part of the market, but a gut reaction to fear. While there is no denying that any regulatory move that bans any aspect of crypto is bad, it is not in the domain of possibility for any Turkey-related crypto news to bring down the global bitcoin market and altcoin markets with it. Instead, it is that reaction of new traders to regular crypto market events that manages to do the same.