On Saturday, Bitcoin lost over a third of its value as a mix of profit-taking and macro-economic concerns caused about a billion dollars in cryptocurrency selling. At 9.20 a.m. GMT, bitcoin was trading at $47,495 (€41,980.83), down 12%.
During the session, it went as low as $41,967.50 (€37,095.07), bringing the day’s losses to 22%.
It had recovered marginally to $48,752.15 (€43,092.03) by 22.01 GMT, after losing $4,991.54 (€4,412.02) from its previous closing. Ether, the token linked to the Ethereum blockchain network, fell more than 10% as a result of the broader cryptocurrency selloff.
It, too, fell 3.61 percent to $4,070.52 (€3,597.93), a loss of $152.28 (€134.60) from its previous closing. The market capitalization of the 11,392 currencies tracked by cryptocurrency analytics portal Coingecko fell over 15% to $2.34 trillion (€2.07 trillion). Last month, when Bitcoin achieved a record $69,000 (€60,989), its value momentarily surpassed $3 trillion (€2.65 trillion).
Why did markets crash?
The drop comes after a tumultuous week in the global markets. After statistics revealed that US employment growth slowed in November and the Omicron version of the coronavirus left investors on edge, global markets and benchmark US government yields fell on Friday.
Justin d’Anethan, the Hong Kong-based head of exchange sales at cryptocurrency exchange EQONEX, said he’d been keeping an eye on the rise in leverage ratios in the cryptocurrency markets, as well as how major investors were shifting their coins from wallets to exchanges. The latter is usually indicative of a desire to sell. “In the crypto space, whales appear to have transferred coins to a trading venue, used a bullish bias and leverage from retail traders, and then pushed prices down,” he said.
The selloff comes ahead of hearing before the US House Financial Services Committee on December 8 by officials from eight prominent cryptocurrency companies, including Coinbase Global CFO Alesia Haas and FTX Trading CEO Sam Bankman-Fried. As policymakers deal with the consequences of cryptocurrencies and how to effectively regulate them, the hearing will be the first time prominent actors in the crypto markets will testify before US Congress.
Crypto traders turning bearish
The US Securities and Exchange Commission (SEC) rejected WisdomTree’s second request for a spot-Bitcoin exchange-traded fund last week. According to data from another site, Coinglass, approximately $1 billion (€883.9 million) worth of cryptocurrencies were liquidated in the last 24 hours, with the majority of the transactions taking place on the digital exchange Bitfinex.
“If anything, this is an opportunity for many investors who previously felt they had missed the boat to purchase the drop. We can see tether being purchased at a premium, implying that individuals are preparing capital in the crypto sector to do precisely that “D’Anethan was referring to the cryptocurrency world’s largest stablecoin.
The cost of holding Bitcoin via perpetual futures, which peaked at 0.06 percent in October, has also fallen, indicating that traders have turned negative. The financing rate on BitMEX, a cryptocurrency trading platform, decreased to a negative 0.18 percent from 0.01 percent for the most of November.