Bitcoin slumped Friday bringing this month’s spirited surge to a halt and taking rival coins down with it.
The downdraft came after the world’s largest digital currency more than doubled in 2019, with many participants struggling to pinpoint reasons for the rally. In regard to Friday’s spike, the exchange Bitstamp tweeted that it executed a largest sell order and they were investigating it, as they would with any event that causes large-scale movements.
Bitcoin slid as much as 14%, before trimming that loss to about 6.5%, trading at $7,179 as of 10:45 a.m. in New York. Ethereum, Bitcoin Cash and Litecoin were down about 5%-8%. The Bloomberg Galaxy Crypto Index tumbled 9%, heading for its largest one-day slide in a month.
Speculation over what underpinned the early-May surge in the anonymously owned tokens has run from a possible squeeze on short positions to investor relief that recent hackings and scandals weren’t disrupting the broader market.
Of particular note was conjecture that stronger buying of Bitcoin — the most stable digital asset — came from sellers of Tether, the once-stable intermediary coin on crypto platforms whose promoters recently said it was no longer backed by U.S. dollars in a 1-to-1 ratio.
Last month the New York attorney general accused Tether and giant crypto exchange Bitfinex last month of participating in a cover-up to hide losses of about $850 million. Bitfinex and Tether, which are affiliated, deny the allegations and characterized the transaction as a loan.
One technical measure known as trading envelopes that some analysts follow suggest it may be difficult to post continued gains. Bitcoin has dropped back under the upper band of the envelope, indicating its upper trajectory may be limited after it tested the $8,500 level and failed to breach it.
The difference between both bands is at its largest delta since the sell-off in November 2018, indicating there is not much support for Bitcoin and it may need to stabilize and find a trading range before its next run up, or down.