The great crypto crash in September 2018: why did the cryptocurrency market collapse?

Abstract

The cryptocurrency crash on the 5th of September, 2018, resulted in price decreases in 95 of the 100 leading digital currencies. We obtained millisecond data of some of the more prominent cryptocurrencies–bitcoin, ethereum, ripple, bitcoin cash and eos–and some of the smaller cryptocurrencies–neo, nem, omg, tezos and lisk–that were most affected in the crash and investigated what caused the digital market to collapse. We find that the behaviour of the more prominent cryptocurrencies and bitcoin, in particular, was the dominant factor behind the crash. We also find that smaller cryptocurrencies followed the behaviour of the larger ones in the crash. Furthermore, our empirical findings show that the trading behaviour of cryptocurrency traders (CTs) did not trigger the digital market crash. We propose the introduction of a single-cryptocurrency circuit breaker most prominent largest cryptocurrency–bitcoin–that will halt trading during market disruptions.