Is the "Dark Thursday" sell-off of Bitcoin due to lack of spot liquidity or PlusToken responsible?

Bitcoin is called the King Coin for a reason. Even after a significant price drop on March 12, BTC continued to dominate other altcoins. In fact, according to Qiao Wang, product manager at Messari, many traders will dump altcoin their and switch to Bitcoin. This, he asserts, will lead to an increase in Bitcoin dominance, a number that could reach 90% by the end of the ongoing financial crisis. At the time of writing, this dominance accounts for 64.7% of the total market capitalization.

Bitcoin lacks drilling 2

Source: Coinmarketcap

On a recent podcast, Nicholas Merten, founder of DataDash, shared his thoughts on the recent sell-off and the main reasons behind it. Note that COVID-19 is only a factor and not a major cause of the market decline, he noted that the lack of spot liquidity and the various Ponzi schemes could play a bigger role.

“If you have too much liquidity on derivatives platforms compared to spot exchanges, you will encounter a problem in which the spot exchanges are following prices on the underlying spot market. low price ”.

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Talking about the ponzi PlusToken program, which accounts for 1% of all hundreds of millions of dollars worth of Bitcoin and Ethereum was stolen, he said:

“Basically, because they are aiming to exit positions in these cryptocurrencies, they have been waiting for months to search for exchanges where they can sell it and eventually they can sell. on the spot exchange. This causes the seller effect and the price keeps falling, in which orders are continuously executed on the order-book causing the price to drop.

Bitcoin lacks drilling 3

Bitcoin liquidity index. Source: Bravenewcoin

It is a fact that the lack of liquidity may reflect a drop in asset prices, a hypothesis that may be valid in the case of Bitcoin. The prospect of BTC temporarily became worse after ‘Dark Thursday.” Bitcoin's liquidity index has dropped from $ 7853.86 to $ 4931.29 in just one day and is currently at $ 6708.37 at press time.

Merten noted that Bitcoin's price could be constrained by scammer seeking to liquidate at least $ 2 billion in cryptocurrencies in one of the largest Ponzi schemes ever, PlusToken.

However, Blockchain Chainalysis has ruled out PlusToken as the culprit.

“We do not believe that the liquidation of PlusToken is responsible for Bitcoin's price decrease. Although Bitcoin was transferred between PlusToken addresses over the weekend, very few of them have moved to exchanges. ”

Bitcoin lacks drilling 4

Source: Chainalysis

The chart given by Chainalysis shows how many PlusToken Bitcoins were sent to exchanges daily in February. PlusToken sent a total of about 23,000 BTC to the exchange, mostly before the price cut. starting on Sunday, March 8. Therefore, the company concluded that the liquidation of PlusToken may not be the cause of the discount.

Disclaimer: This is not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.


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