What Caused the September 2018 Bitcoin Price Crash?

At the time of writing this on the 6th September 2018, Bitcoin has dropped 8.4% in the past 12 hours (it's currently at $6750, and looks to be dropping even more as we write this). Many altcoins like NEO and OMG dropped as much as 20%. This led to many news stories being posted around why this Bitcoin 'crash' happened.

Below we go through a number of these opinions.

Long-term factors causing Bitcoin's price to decrease?

Further down we go through recent news articles that may have led to this Bitcoin 'crash', but you should also be aware of some more long-term trends:

  • On the 3rd/4th September 2018 many technical analysts suggested that because Bitcoin's RSI (relative strength index) was high, it was overbought. This theory would suggest that until the RSI decreases Bitcoin's price will continue to decrease (as of writing this it's dropped back to mid-August levels).
  • Back in late July 2018 Bitcoin's price saw a decrease after news that a prominent Bitcoin ETF was rejected. Many analysts seem to think the behaviour of Bitcoin's price over August took this into account, that it wasn't unusually high following this (if this occurred it could have led to a correction at some point as a result).
  • Very speculative: Back in June 2018 we posted a similar analysis to this, and included a theory that Bitcoin follows an up or down trend between the 6th of each month, where whatever direction it moves around the 6th is the direction it will move for the rest of the month. Today is the 6th, so this theory is again starting to pop up online suggesting that Bitcoin will decrease in price for the rest of September. Looking at the 6th of each month for the past 12 months this theory doesn't always hold up, but it does seem to work more often than not (where often Bitcoin's price seems to change direction around the 6th).

Which short-term factors caused the crash?

With the long-term factors above in mind, strong negative news could, in theory, trigger a large price drop like what happened on the 5th September. Some of the common topics in recent Bitcoin news articles:

  • CoinTelegraph shared an article titled 'Abra CEO: SEC Denies Bitcoin ETFs Because Applicants Do Not Fit Industry Archetype'. A popular Reddit post suggests this title alone may have been a significant factor in Bitcoin's price drop, as it may have triggered trading bots to sell. This same article suggests that a Bitcoin ETF will happen 'in the next year', so the content of this article has both positive and negative implications for Bitcoin's price, but given the timing of the post, it could have been a factor in the recent decrease in Bitcoin's price.
  • Business Insider posted an article several hours before the price drop around Goldman Sachs cancelling plans for a cryptocurrency trading desk, or specifically a claim that 'Goldman has moved plans to open a desk for trading cryptocurrencies further down a list of priorities for how it can participate in cryptocurrency markets'. The timing of this suggests it may have been related to the first drop of around 5%.
  • On the 4th September ShapeShift, a popular service used for converting between different cryptocurrencies without the need for KYC (personal identity verification), launched a new membership program. In this, they mentioned that this membership, which requires personal information, 'will become mandatory soon'. On the 5th September several hours before the Bitcoin price drop this started being shared on various news websites, so this may have been a factor in the Bitcoin price drop. ShapeShift is used by many third-party services for currency conversion, so more negative news may come out related to this in the future if these third-party services are affected.

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