Bitcoin prices plummeted overnight as crypto markets get back on the rollercoaster
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It was a rough night on the crypto seas last night, as a slump in Bitcoin prices was accompanied by sharp falls in the other major alt-coins.
After edging back below $US10,000 ($14,743) earlier this week, BTC promptly fell off a cliff to around $US8,000 just before 6am (Sydney time) this morning, before rebounding slightly.
No major crypto was immune as Ethereum, Litecoin, Ripple and Bitcoin Cash all suffered double-digit percentage falls.
BTC prices stabilised in Asian trade, and a short time ago were holding steady back above $US8,500.
As ever when crypto markets experience a bout of volatility, various analysts and market commentators look for a catalyst.
One report on Coindesk pointed to trading activity on the Bitmex exchange, where a wave of bullish trading positions were closed out as the Bitcoin price fell.
Based in the tax haven of Seychelles, Bitmex offers up to 100x leverage on Bitcoin trades, allowing traders to ramp up their risk (and potential reward) profile.
By transaction volume, Bitmex is one of largest crypto exchanges in the world behind market-leader Binance, which operates out of Malta (also a tax haven).
A key feature of the largest platforms is that they offer crypto-to-crypto trades, where users can trade BTC against hundreds of other alt-coins.
That differs from exchanges in advanced markets such as the US and Australia, which only match pairs on a limited number of crypto assets to avoid falling foul of securities laws.
Binance has been steadily growing its business across different jurisdictions, launching a fiat-to-crypto exchange on the British territory of Jersey in January.
The company is also launching a fiat-to-crypto US exchange limited to just seven coins. Despite its efforts to appease regulators, the Binance US platform is still unapproved in 13 US states.
The net effect is that as the crypto space matures, the market-making mechanism for crypto trades operates differently by jurisdiction.
For Adrian Przelozny, CEO of domestic exchange platform Independent Reserve, operating within a stricter regulatory framework “all boils down to consumer protection”.
“As an Australian business, we’re accountable for every decision we make,” he said. “We have systems and processes to protect our customers and corporate governance structures to make sure we do the right thing.”
He noted that for the huge offshore crypto-to-crypto platforms, users are often restricted from depositing traditional fiat funds to start trading.
“Many international exchanges are crypto-to-crypto only and that’s because they can’t access banking,” Przelozny said.
“Independent Reserve allows consumers to deposit Australian, New Zealand and US dollars. This privilege of fiat-to-crypto is derived from doing the right thing by the consumer.”
Despite the volatility overnight, Przelozny said that just because prices fall doesn’t mean activity in the market slows down.
“If prices go down, we often find new customers that have been sitting on the sidelines will dive into the markets. When prices go up, active traders will often sell, looking to re-enter the market on the rebound,” he said.