Why the bitcoin (BTC) price was smashed overnight

In morning trade the crypto market is rebounding after sizeable declines during U.S. trade overnight.

At the time of writing the entire market value is US$313.8 billion, up almost US$10 billion in a matter of two hours according to Coin Market Cap.

What happened?

Overnight the bitcoin (BTC) price was crushed after Twitter announced plans to follow in the footsteps of Facebook and Google by banning cryptocurrency advertising on its platform.

After announcing its plans a Twitter spokesperson told CNBC that: “We are committed to ensuring the safety of the Twitter community. As such, we have added a new policy for Twitter Ads relating to cryptocurrency. Under this new policy, the advertisement of Initial Coin Offerings (ICOs) and token sales will be prohibited globally.”

The reaction to the news was extremely negative and traders initially hit the sell button en masse, causing the BTC price to fall over 8% to below US$8,000.

It has since rebounded from this sell-off and has narrowed its decline to under 4% at US$8,228.04 per coin.

I think this was a predictable rebound considering bitcoin doesn’t need to advertise and therefore the bans have little impact on its prospects.

In fact, the move is likely to be a positive for the world’s largest cryptocurrency. By preventing ICOs from advertising it lowers the chances of traders being burned from making highly risky investments elsewhere in the hope of striking gold.

While it may be a positive for bitcoin, it is likely to be a negative for some of the smaller altcoins on the market such as EOS (EOS), Cardano (ADA), NEO (NEO), and IOTA (MIOTA) which struggle to gain as much attention and may need to resort to advertising. These altcoins have understandably fallen more than most today and are yet to rebound as strongly.

What now?

At this stage I feel that sentiment is at a crossroad and could go either way from here. While I think the odds are in favour of prices rebounding further, there’s no guarantee that they will.

I would suggest that any investors looking to buy bitcoin only put in what they can afford to lose.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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