It is no secret that March 12, 2020, marked one of the darkest days in crypto history. This was the day when Bitcoin (BTC) witnessed one of the largest single-day price dips in its decade-long existence, swooping from $8,000 to a staggering low of $3,600, albeit briefly, just for a matter of minutes.
To put things into perspective, within a span of just 24 hours, over $1 billion worth of BTC longs were liquidated, causing one of the most intense value drops witnessed by the digital market in its brief history. Another way to look at the crash is that during the above-stated time frame, BTC lost nearly 50% of its value, a statistic that is quite striking, to say the least.
Also worth noting is the fact that over the course of the same week, Bitcoin and many other cryptocurrencies exhibited an extremely high correlation with the United States stock market, which at the time was seen as a possibility due to the overall drop in investor appetite for high-risk assets, especially as the COVID-19 pandemic was just beginning to rear its ugly head.
The steep correction in the U.S. stock market — which saw the Dow Jones Industrial Average dip by 2,300 points — was its worst decline in over 30 years. This correction, coupled with a lack in demand for BTC, resulted in the cryptocurrency’s price first dropping first to around the $5,000 mark and then to around $3,600.
Is another crash incoming?
To explore the possibility of whether the crypto sector may be on the receiving end of another massive dip sometime this month, Cointelegraph reached out to CryptoYoda, an independent analyst and cryptocurrency expert. In his view, the triangular combination of finite supply, ever-growing demand and highly leveraged trading is a recipe for flash crashes and turbulent volatility, adding:
“We will continue to see many temporary crashes along the way, as markets have a way to regulate and balance the intense emotions in both retail and institutional investors and traders. It is just that we never witnessed an experiment on such a tremendous scale involving limited supply in combination with insane demand and explosive tools like leverage that will make this ride rather bumpy.”
Hunter Merghart, head of U.S. operations for cryptocurrency exchange Bitstamp, pointed out that even though the structure of the crypto market has evolved dramatically since last March, the possibility of another crash cannot be ruled out entirely. That being said, he stated that the crypto industry is now full of regulated spot trading avenues, derivatives platforms that ensure a high level of liquidity.
Furthermore, Merghart believes that when compared to previous years, there are now many more active participants within the global crypto landscape who can help ease out any imbalances if volatility were to suddenly increase overnight for some unforeseen reasons.
Anshul Dhir, co-founder and chief operating officer for EasyFi Network — a layer-two DeFi lending protocol for digital assets…