One could write pages on this topic, but here is a short summary of what most likely happened. All points in my summary are related and contributed to the sell-off we’ve seen the last days.
Large holders losing patience?
Trading volume has been very low over the past 6 months. The “odd” sideways movement we’ve seen lately is a result of automated traders and the exchange liquidity provider doing most of the trading.
Large holders have been patiently waiting for new money to enter the market, but we haven’t seen that happen yet. As a result, buy-side liquidity is too low for large holders to exit the market without causing havoc.
Any considerable number of sell orders would have a domino effect, as large holders see each other wiping the liquidity off the books as they sell. Once the main exchange market maker algorithms detect a big move, they remove themselves so they aren’t overexposed long or short.
Result? Once the liquidity is gone it becomes a race to sell first and nobody wants to be left holding the bags.
Are ICOs cashing out and as a result thinning the order books? The SEC has recently determined that the 2017 hype-fueled ICOs were unregistered security sales. They’ve fined an initial wave of ICOs approximately $250k each and mandatory refunds to everybody who bought tokens during the ICO.
The elephant in the room is that refunds must be paid in USD, but ICOs mostly raised in cryptocurrencies. That means any ICO who raised $10M worth of cryptocurrency but never cashed out, is now left with a stack perhaps worth only $2-4M, yet they’re liable for $10M USD in refunds.
In short, any ICO nearby the reach of American regulators might be trying to cash out.
One of the main hypothesizes is that the sudden sell-off was caused by the Bitcoin Cash fork. It has become an ugly competition between Roger Ver (Bitcoin ABC) and Craig Wright (Bitcoin SV).
Craig has threatened to “bleed dry” the Bitcoin ABC side in a hash war. This influences the price of Bitcoin because, in a hash war, both sides will have to rent hash from the Bitcoin mining pool. This is paid in Bitcoin and sold on the market to cover electricity and as a result, the price drops.
Craig’s outright threat that he would bring the price of Bitcoin down to $1,000 in a hash war has most likely also pushed many to sell before it gets ugly.