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Coinbase Crash : Bitcoin Halving Effect?

Image: Loya Liu

Cryptocurrency prices increased last week, powered by a massive price rise in Bitcoin. According to CoinMarketCap.com numbers, the entire market capitalisation of cryptocurrencies jumped $35.3 billion on 29th April. As per Forbes a cryptocurrency options trader known as “Theta seek,” says many over-the-counter (OTC) desks saw strong sell-off rates as the price of Bitcoin hovered above $9,000.

At the same time Coinbase suffered an outage due to a system failure and a massive influx of buy orders. The servers and IT systems of Coinbase were not able to keep up the demand, the Outcome? A crash.

When Coinbase was off to system failure, the price of Bitcoin surged past $8,000, but it briefly soared to $9,400. As per Forbes when Bitcoin rapidly burst out of the $8,000 area into the $9,000s, data shows investors pushed to sell the $9,000 to $9,400 range of the dominant crypto-currency. Much to the dismay of traders at coinbase, they were unable to capitalize on the rise due to network failure. Similarly this kind of network failure happened in 2017 at the time of the crypto rally.

Source: Coinmarketcap

Coinbase has been thoroughly protected, consistent with the laws of New York, and has a reputable custodial service and was never hacked. However, as most American banks are supporting the coinbase exchange, traders may connect their bank accounts and deposit or withdraw funds at will. Meaning it is one of the preferred exchanges among traders. Yet ease and convenience comes at a cost, such as network failure that has prevented thousands  of orders worth millions from losing opportunities on the Bitcoin and Crypto markets.

Is crash related to Halving?

An incident known as ‘halving’ of bitcoin is happening, as Fyggex published earlier an article about Halving, at present miners are being rewarded 12.5 per mined block. Every few years the bonuses are halved to hold a curtain on inflation. By May 2020, it will again cut the reward per miner in half, to 6.25 new bitcoin.

This effectively raises the bitcoin supply coming into the market. Halving is an operation conducted every four years. Past instances of halving followed major price spikes in bitcoin. According to CNBC, Matthew Dibb, co-founder of Stack, a bitcoin index fund provider said

“While part of this rebound may be explained by a renewed ‘risk-on’ attitude of global investors, it is also clear that bulls have been triggered by the upcoming halving event and the anticipated appreciation in value in the wake of it,

Matthew further stated that “for those buying into bitcoin now, many see this as an opportunity to buy BTC at bargain basement rates before a price pop post halving.”

Image: Nattanan Kanchanaprat

Conclusion

Investors facing breakdowns during  volatility are often quick to complain about wrongdoing. Many more cynical market analysts claim that exchanges intentionally freeze processes in an effort to monitor sudden movements.

It’s much more likely that Coinbase and other exchanges are not designed for the kind of traffic that comes with that uncertainty on the market. While the reason is much less serious, it is no less damaging as traders lose a valuable time and opportunity.

*Disclaimer: Fyggex, does not give any guidance, advice or recommendations to neither invest or not in any available cryptocurrency directly or indirectly via any trading platform, exchange or provider. Our sole purpose is to make you aware of the related real or potential risks and opportunities so that you can make your own research prior to any financial decisions you may want to take. Past performance and position are not a guarantee of risk-free future returns.

Sources:

www.cnbc.com/2020/04/30/bitcoin-btc-cryptocurrency-prices-rise-due-to-central-banks-halving.html

www.independent.co.uk/life-style/gadgets-and-tech/features/bitcoin-halving-price-prediction-2020-a9488506.html

www.forbes.com/sites/youngjoseph/2020/04/30/bitcoin-rally-faces-steep-reversal-as-otc-desks-record-record-high-bitcoin-sell-off-at-9k/#7261eeed6203

https://beincrypto.com/bitcoin-pumps-hard-coinbase-drops-service-

CoinMarketCap.com

www.coindesk.com/coinbase-suffers-temporary-outage-as-bitcoin-soars-to-8900

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