Bitcoin prices plummeted sharply on Saturday, dropping to a low of around $43,000.

According to Coin Metrics, the world’s most prominent cryptocurrency trimmed losses later as it changed hands at around $49,663.

A 24-hour period starting from early Friday morning to early Saturday morning, bitcoin’s price dropped from about $57,000 to $47,000, losing $10,000, or over 17%.

The price of ether also dipped to a low around $3,500 on Saturday. It recovered some of the losses by Saturday night, trading at $4,233. Ether, the world’s second-largest digital coin by market value, lost over 16% from Friday morning around 8 am ET through to Saturday 8 am ET.

Crypto began plunging on Friday owing to stocks being pulled back and investors fleeing to the safety of Treasuries, driving the 10-year yield lower. Risky tech stocks were among the biggest losers on Wall Street on Friday, with Tesla shedding 6%. The ARK Innovation fund lost 5% on Friday and 12% on the week.

As the sentiment dampened in the tech space, those investors might have also started unloading their crypto.

However, no obvious reason has been determined for the cryptocurrency drop, especially overnight Saturday when the losses fast-tracked.

J.C. Parets, chief market strategist for All Star Charts technical research, wrote in a note Saturday morning, “The evidence points to this being yet another derivative-induced selling event,”. It further read, “The September flash crash had the same drivers as this selloff — leverage was flushed from the system in a violent fashion, which later enabled the market to eventually move higher toward a new all-time high in October.”

Mirroring his thoughts, Will Clemente, insights analyst at Blockware Solutions, said that the sell-off was derivatives-based and added that open interest has been at all-time highs for over a month while funding rates have been positive. He further added that it could be the set-up for another bull run like the one that kicked off this year.

Clemente said, “There’s a reasonable case that we could see the opposite effect heading into Q1, as funds are willing to take on more risk for the new year with fresh profit and loss”. He added, “This effect assisted in bitcoin’s massive move in January 2021.”

The analyst said that network dynamics are still “healthy and show supply continues to move to long term investors.”

Both cryptocurrencies have witnessed turbulent trade since the emergence of omicron Covid variant, tracking global stock markets which have been also volatile. On Nov. 26, bitcoin hit a seven-week low close to $54,000, officially entering bear market territory.

Bitcoin is now down around 30% from an all-time high close to $69,000, which it hit in early November. Bear markets are typically defined as a decline of 20% or more from recent highs.

The World Health Organization on Friday said the Covid omicron variant has been detected in 38 countries, up from 23 two days ago, with early data suggesting the strain is more contagious than delta.

Parets remarked that the coming days and weeks are expected to bring “choppy” price action. He said, “A contraction and basing process is likely to take place after such a violent move and we want to treat sharp upward rallies suspiciously right now”.

Fairlead Strategies’ Katie Stockton noted that long-term momentum is still moving upward despite the correction. She cautioned investors against reducing holdings of bitcoin or other correlated altcoins until a breakdown is confirmed — which could mean waiting until Monday to reassess.

Stockton said, “It is rarely a good idea to sell into an emotionally-charged downdraft like this given the possibility of a shakeout. Stockton added, “A close above $48,000 tonight would be an incremental positive based on the current high-low range.”

The story was filed by the News Desk.
The Desk can be reached at info@thecorrespondent.com.pk.

The story was filed by the News Desk. The Desk can be reached at info@thecorrespondent.com.pk.

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