On Saturday, Bitcoin lost over a third of its value as a mix of profit-taking and macro-economic concerns prompted nearly a billion dollars in cryptocurrency selling. Bitcoin was trading at $47,495 (€41,980.83), down 12% at 9.20 GMT.
During the session, it dropped as low as $41,967.50 (€37,095.07), bringing the day’s losses to 22%.
It has risen marginally to $48,752.15 (€43,092.03) by 22.01 GMT, after losing $4,991.54 (€4,412.02) from its previous close. Ether, the token linked to the Ethereum blockchain network, fell more than 10% as a result of the broader selloff in cryptocurrencies. It, too, fell 3.61 percent to $4,070.52 (€3,597.93), shedding $152.28 (€134.60) since its previous closing.
The market capitalization of the 11,392 currencies tracked by cryptocurrency monitoring platform Coingecko fell over 15% to $2.34 trillion (€2.07 trillion), according to Coingecko. Last month, Bitcoin achieved a new high of $69,000 (€60,989), briefly crossing the $3 trillion (€2.65 trillion) mark.
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
Last week, the US Securities and Exchange Commission (SEC) rejected a second spot-Bitcoin exchange-traded fund proposal from WisdomTree. Data from another platform Coinglass showed nearly $1 billion (€883.9 million) worth of cryptocurrencies had been liquidated over the past 24 hours, with the bulk being on digital exchange Bitfinex.
“If anything, this is the opportunity to buy the dip for many investors who might have previously felt like they missed the boat. We can see tether bought at a premium, suggesting people are getting cash ready, within the crypto space, to do just that,” D’Anethan said, referring to the biggest stablecoin in the cryptocurrency world.
A plunge in Bitcoin funding rates – the cost of holding Bitcoin via perpetual futures which peaked at 0.06 per cent in October – also showed traders had turned bearish. The funding rate on cryptocurrency trading platform BitMEX fell to a negative 0.18 per cent from levels of 0.01 per cent for most of November.