Hi folks.
Just sharing this interesting views of a poster on reddit:
The cause of today's chaos is likely large hedge funds using expiring BTC futures contracts as safety nets to exploit the only sure-thing in this market: a large amount of new/overextended investors who are easily moved to panic sell during a flash-crash.
It is likely that such drop is clearly caused by manipulation indeed, I find this theory interesting.
One can also notice that every year since 2015 there is always a drop in January and this may be also due to Chinese new year. This is also possible but I don't believe small holders will cause such drop, so the hedge funds theory is more likely.
You can read more here >
theory on the real cause of today's chaosI don't really see the whole Chinese new year theory that you also broke down. You're right, there are too few people who hold that money AND also celebrate Chinese new year AND would be willing to sell in order to have cash for the event. At each stage of that statement, you end up knocking out more and more people, until you're left with such a small population percentage.
It's (what I believe) mostly a snowball event. A couple of investors pull their money out, the prices go down, more people panic sell, and those who don't panic sell end up buying the dips and panic sellers come back in on the way up. It's cyclical and will continue to happen.