Is this a common occurrence for cryptocurrencies?
Bitcoin= sound money
Yes.
Bitcoin sound money and these drops overnight are very normal happenings in the market. And whenever it drops a lot, you'd see the domino fall because the altcoins market are also following. So the reason for this is simple, Bitcoin is highly volatile and that's why it moves a lot from time to time but sometimes, it doesn't move at all for a couple of days. But when it does, expect that it's only two of it, either up or down.
That's how the market works, and I believe it is also common in cryptocurrency for many reasons. First, for me, the reason is having 24/7 availability to trade; unlike the stock market, there are only specific trading hours you can trade.
Another thing is that the Bitcoin market cap, market cap could still be a factor, especiallya few years back, where we can see strong volatility comparedto these days.
Yeah, that's another feature of the market. While the others are probably sleeping, they'll just wake up to a sudden flash crash that they have never expected. Being open 24/7 could be an advantage to many but not for the others too. But if we're going to analyze and compare that with the stock markets, they've got opening and closing time. If you've been stuck during the closing and you're about to short, you'll have to wait until tomorrow or much worse, at the end of the weekend before you can finally close that short.
I'm curious what will happen to the volatility if market cap of Bitcoin will multiply in the future.
It's said that it will be lessened as the supply that's to be mined decreases. But we have no clue on what actually will happen by that time.