The last week in cryptocurrencies reduced the market capitalization by $41.5 billion, with most crypto indices falling 25%. Bitcoin touched $4035 off from the 2018 high of $19,843.11, while ethereum classic (ETC-USD) fell to $119.402 from $1,420.86, writes Bob Savage.

Price action rather than news again dominated the space.

Understanding the drivers for the retracement in price will sow the seeds for knowing the opportunity to rally again.

The reasons for any price drop in any market are numerous – more sellers than buyers – but here are the standard three:

1) Technical – the break of $6000 and $5800 last week led to a Fibonacci retracement to $4200 in bitcoin (BTC/USD).

2) News - Bakkt delays launch. Bakkt delayed the launch of their bitcoin futures trading platform until January 24, 2019. The delay came just one day after the price of bitcoin and the cryptocurrency market as a whole began to plummet. Of course, there is also the ongoing BTC Cash SV vs. ABC hashwar, the ongoing SEC and CFTC  investigations, and the exchange issues that populate headlines and add to the gloom.

Reuters Special Report: Little known to many investors, cryptocurrency reviews are for sale.

3) Leverage – The unwind of ETH ICO money continues to be a significant driver of selling as the platform allowed fractional money growth and that unwinds with the price drop.

While these three factors explain much of the reasoning for selling digital assets, there are two other stories that matter – the correlation of the crypto market to all other risky assets – whether that is oil which fell significantly or equities where the tech sector again led losses – FAANGs are now in a bear market.

Both are fundamentally connected to cryptocurrencies as one captures the cost of energy and the other the growth and value proposition of new technology.

The other factor that matters is seasonal – and not just a calendar year view – but a business or bubble cycle outlook. This is where the BTC bubble sits in comparison to other famous financial manias.

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