fbpx
The Daily Chain
No Result
View All Result
  • News
    • All News
    • Assets
    • Bitcoin
    • Business
    • Editor’s Picks
    • Technology
  • Markets
    • Market Updates
    • Live Cryptocurrency Market Prices
    • Press Release
  • Features
    • Articles
    • Opinion
    • Interviews
    • Quiz
  • Education
    • Blockchain
    • Trading
    • Investing
    • Safety
  • Media
    • Video
    • Podcasts
  • Reviews
  • Asset List
  • News
    • All News
    • Assets
    • Bitcoin
    • Business
    • Editor’s Picks
    • Technology
  • Markets
    • Market Updates
    • Live Cryptocurrency Market Prices
    • Press Release
  • Features
    • Articles
    • Opinion
    • Interviews
    • Quiz
  • Education
    • Blockchain
    • Trading
    • Investing
    • Safety
  • Media
    • Video
    • Podcasts
  • Reviews
  • Asset List
No Result
View All Result
The Daily Chain
No Result
View All Result
Home Trading

What causes a cryptocurrency crash?

Alex Aves by Alex Aves
10th July 2020
4 min read
0
cryptocurrency crash
0
SHARES
0
VIEWS
FacebookTwitterLinkedinTelegramEmailWhatsapp

Cryptocurrency markets are famously volatile. In fact, volatility is where a large amount of crypto media attention comes from and it’s something that attracts most cryptocurrency traders and investors. 

Volatility creates the opportunity to earn big profits, but it doesn’t always play nice. What goes up must come down… no investor is immune to the infamous cryptocurrency crash.

What a crash looks like 

What causes a cryptocurrency crash?

A cryptocurrency crash is when the price of a cryptocurrency falls dramatically in a short space of time. This has happened many times before and it’s not unique to crypto. In fact, all financial markets have price crashes, they are just not as brutal or as common as crypto.

Cryptocurrency is a unique asset class in which there is potential for tradable assets to drop in price absurdly quickly. Let’s look at the most common causes of a cryptocurrency crash. 

The causes of a cryptocurrency crash

Cascading effect – the catalyst 

Almost every cryptocurrency crash begins with a trigger or a catalyst but will proceed because of cascading sellers. 

Essentially, once a small sell-off begins people start panicking. It only takes a small amount of panickers to start selling to drum up more fear and heightened selling. This isn’t helped by traders having sell orders or stop losses in place to reduce risk because they will be triggered and contribute to the cryptocurrency crash. 

As the panic spreads, selling grows and crashes peak very quickly. 

Support broke

‘Support’ is a term used in technical analysis that refers to a key price level that traders are watching closely. Essentially a support level is said to ‘support’ the price of an asset and if the price falls below this support then traders expect the price to continue downwards to lower support levels.

When support breaks, traders will either close positions or open short positions, both of which create selling and can contribute to a market crash. 

Liquidity

Cryptocurrency markets famously lack liquidity. This means that there are not enough buy and sell orders in the order books, which is especially true on smaller exchanges and with lesser known crypto coins.  

When there isn’t much liquidity, a cryptocurrency crash is even more likely because the market is easier to influence. In a low liquidity market a relatively small sell could cause a huge price drop. 

Taking profit

Large price crashes can happen when an asset reaches a new high and traders start to take profit on their positions. In doing so they are selling off the asset which then can invoke panic. Other traders start to realize that the top is in and price starts cascading downwards. 

News

The crypto world feeds on news. Good news can cause prices to go up… and bad news can cause prices to crash. 

Some of the most famous cryptocurrency crashes have been due to projects announcing closure or news websites uncovering exit scams. When investors know their investment is dead in the water they all rush to sell – causing a cryptocurrency crash on a new level. 

Start trading properly 

If you are looking to start trading or investing, don’t start with guesswork. Check out our live technical analysis feed to learn from the best, or read Blockfyre reports to find gems and learn how to conduct investment analysis. 

Most importantly, be careful out there and know that a cryptocurrency crash can happen at any time. Don’t get caught out – trade with care. 

Tags: education
ShareTweetShareShareSendSend
Alex Aves

Alex Aves

Alex is a crypto enthusiast that has been enthralled with the crypto space for over two years now.

Related Posts

Uniswap — A Guide for Beginners
Articles

Uniswap — A Guide for Beginners

1st October 2020
Canada-s-Wealthsimple-Launches-Bitcoin-Trading-Platform
bchbtc

Canada’s Wealthsimple Launches Bitcoin Trading Platform

16th July 2020
start crypto trading
Trading

Everything you need to know to start trading cryptocurrency

11th July 2020
relative strength index RSI
Trading

How to use Relative Strength Index (RSI) to trade crypto

10th July 2020
what is a cryptocurrency exchange
Trading

What is a cryptocurrency exchange?

10th July 2020
Much to Make of Recent Market Rally - But What’s Driving Crypto?
Trading

What is a Cryptocurrency Bull Market?

13th September 2020
Next Post
market cap cryptocurrency

Market cap in cryptocurrency and why it’s important

what are cryptocurrency airdrops

What are cryptocurrency airdrops?

Please login to join discussion
  • All News
  • Editor's Picks

SEC’s exam division releases ‘risk alert’ – highlighting concerns around regulatory compliance

Chinese Police issue warning about CBDC scam promising access to $186M Government Fund

Nicolas Maduro says a digital currency “surprise” is coming

Will SEC Investigate Elon Musk’s Impact on Dogecoin?

BTC Price Eyes Worst Weekly Slide since March Of 2020

Join our newsletter!

Enter your email to receive our newsletter.


Don’t worry, we don’t spam
ADVERTISEMENT

Popular Posts

  • ‘Crypto for Congress’ initiative to send $50 of BTC to US Congress members

    Whale Alert flags over 13000 BTC moved off Coinbase

    0 shares
    Share 0 Tweet 0
  • Coinbase publicly reveals it has held Bitcoin on its Balance Sheet since 2012

    0 shares
    Share 0 Tweet 0
  • Bitcoin sold as low as $6,100 due to a Glitch – Crypto Exchange demands it back

    0 shares
    Share 0 Tweet 0
  • MIT announces 4-year project that seeks to strengthen the Bitcoin Network Security

    0 shares
    Share 0 Tweet 0
  • Canadian Bitcoin ETF attracts over $400mln in investments in 48 hours

    0 shares
    Share 0 Tweet 0

Market Updates

BTC Price Eyes Worst Weekly Slide since March Of 2020

BTC Price Eyes Worst Weekly Slide since March Of 2020

26th February 2021
BTC Market Endures Bias Conflict: Why BTC Prices are Wobbling Around $50K

BTC Market Endures Bias Conflict: Why BTC Prices are Wobbling Around $50K

25th February 2021
CoinShare Lists an Ethereum Traded Product on SIX Swiss Exchange

CoinShare Lists an Ethereum Traded Product on SIX Swiss Exchange

24th February 2021

Media

hashoshi-alts (2)

Altcoin Season Picks / Projects with Huge Potential

9th September 2020
cardano-ADA

Hashoshi: Cardano Shelley is live… but what’s next is WAY BIGGER

19th August 2020
hashoshi-alts

Hashoshi: Low Cap Alts you need to be watching in 2020

5th August 2020
fomohunt-podcast

FomoHunt Podcast – Joe Vezz & Jon Farjo: Tracking Social Sentiment Waves with Lunar Crush

30th July 2020
ethereum-hashoshi

Hashoshi: Ethereum 2.0, Chainlink, Bitcoin Price, and more!

27th July 2020
fomohunt-podcast

FomoHunt Podcast – Joe Roets: Behind the scenes of “Open source money”

24th July 2020
The Daily Chain

The Daily Chain is a news platform and educational hub founded in January 2019. We are dedicated to providing unique and informative daily content across all facets of the blockchain and cryptocurrency industry whether it be news, opinion pieces, technical analysis, reviews, interviews, podcasts and more.

LEARN MORE »

Recent Posts

  • SEC’s exam division releases ‘risk alert’ – highlighting concerns around regulatory compliance
  • Chinese Police issue warning about CBDC scam promising access to $186M Government Fund
  • Nicolas Maduro says a digital currency “surprise” is coming
  • Will SEC Investigate Elon Musk’s Impact on Dogecoin?

Information

  • About
  • Contact
  • Site notice
  • Risk Warning
  • Privacy Policy

Categories

  • News
  • Markets
  • Features
  • Education
  • Media
  • Reviews

TheDailyChain © 2020. The Home of Digital Assets

No Result
View All Result
  • News
    • All News
    • Assets
    • Bitcoin
    • Business
    • Editor’s Picks
    • Technology
  • Markets
    • Market Updates
    • Live Cryptocurrency Market Prices
    • Press Release
  • Features
    • Articles
    • Opinion
    • Interviews
    • Quiz
  • Education
    • Blockchain
    • Trading
    • Investing
    • Safety
  • Media
    • Video
    • Podcasts
  • Reviews
  • Asset List

TheDailyChain © 2020. The Home of Digital Assets

At The Daily Chain, we are committed to protecting the personal data of our audience.
In light of the General Data Protection Regulation, we are asking our audience in Europe to consent to the use of cookies by The Daily Chain and its partners to continue to our site. These cookies are used to personalize your user experience (content and ads) and support and improve the site. Please click “I Agree, Continue to Site” below to consent to the use of this technology and continue to TheDailyChain.com. Visit our Privacy Statement to learn more. Cookie settingsAgree, continue to site
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are as essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled

Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.

bitcoin
Bitcoin (BTC) $ 44,644.00 6.78%
ethereum
Ethereum (ETH) $ 1,369.03 9.21%
cardano
Cardano (ADA) $ 1.19 12.34%
tether
Tether (USDT) $ 1.00 0.14%
binance-coin
Binance Coin (BNB) $ 211.99 9.32%
polkadot
Polkadot (DOT) $ 30.93 8.65%
xrp
XRP (XRP) $ 0.420100 5.27%
litecoin
Litecoin (LTC) $ 159.51 10.21%
chainlink
Chainlink (LINK) $ 24.33 4.84%
stellar
Stellar (XLM) $ 0.408941 1.03%
Newsletter

Join our newsletter!

Enter your email to receive our newsletter.

Don't worry, we don't spam