Bitcoin has endured a terrible plunge. The world’s number one digital currency by market cap – which was trading in the mid-$50,000 range over the past few days – has dropped dramatically and at the time of writing, is selling for just over $49,000, constituting a slip of approximately 17 percent.
Bitcoin Has Crashed Again
The drop occurred over a 24-hour period, spanning from around Friday morning to early Saturday. The currency has also caused other digital assets to slip heavily, with Ethereum – the world’s second largest digital currency – falling to a new low of around $3,500 after trading for well over $4,000 per unit for the last several weeks. That’s a drop of roughly 16 percent over the course of one day.
Several tech stocks also fell in tandem with bitcoin. Tesla, for example, experienced a drop of roughly six percent, while the ARK Innovation fund was also among the biggest losers of the day with a five percent plunge. The company’s stock has fallen roughly 12 percent over just the last week alone.
While it is unclear why bitcoin and its counterparts are falling at press time, it is believed that this may all be part of a general selloff. With tech stocks dropping, it’s likely investors felt that crypto falling next would be inevitable, and thus many sought to limit those losses by cashing out. J.C. Parets – chief marketing strategist for All Star Charts – explained in a recent interview:
The evidence points to this being yet another derivative-induced selling event. 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.
Will Clemente – insights analyst at Blockware Solutions – also stated that he felt the selloff could be derivatives based, and he is confident this could be the storm before another big bull run occurs. He said:
There’s a reasonable case that we could see the opposite effect heading into quarter one, as funds are willing to take on more risk for the new year with fresh profit and loss. This effect assisted in bitcoin’s massive move in January 2021.
Trapped in a Bear Market?
Bitcoin is now down roughly 30 percent since reaching a new all-time high of $68,000 last month. Many analysts believe the asset is trapped in a bear market given that the drop was more than 20 percent. Parets also suggests that the price action for bitcoin is going to be somewhat up and down over the following weeks as the asset works to fix itself. He stated:
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.
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