According to Bloomberg News, the digital currency bitcoin dropped alongside other cryptocurrencies Saturday, which is another indication that a tendency of risk aversion is prevailing in the financial markets.
The largest digital token drop recorded was as low as $42,296. A decline of 10%, was found to be trading at $48,300 as of 10:31 am in New York on Saturday. The token has manifested a decline of more than 20% from an all-time high as observed on November 10th of more than $69,000.
The second-largest token Ether dropped by as much as 17.4% before it could trim the retreat at 4%. As far as the value of the entire crypto sector is concerned, it has shed as much as one-fifth of the value recording a slide of $2.2 trillion, as per tracker CoinGecko, reports Bloomberg News.
For cryptocurrencies, which trade round the clock 24×7, it is not unheard of for them to oscillate at a wild pace during the weekends. This is due to the number of factors which includes thinner trading volumes and a market structure that comprises disconnected exchanges present hundreds in number. And they are “own islands of liquidity”.
According to Antoni Trenchev, who is the co-founder of crypto lender Nexo stated, “As usual, since crypto traders deeply leverage it results in cascading sell orders and liquidations”. Antoni also said that it is necessary to find support between $40,000 and $42,000 and then must rally for a year-end. If that does not take place, it is quite likely that the July lows between $30,000 and $35,000 can be revisited.
The oscillations in cryptocurrencies occur amidst a period when the financial markets are volatile. An increase in inflation is also causing tightening of monetary policies by the central banks, thereby leading to a threat in reducing liquidity tailwind lifting a broad spectrum of assets.
Another factor that has led to the tendency of risk aversion includes the omicron coronavirus variant and fear about the concerns about how things will shape for economic reopening, reports Bloomberg News. From a November record, global stocks were down 4% while Treasuries haven assets have rallied.
Position of Leverage
As per Vijay Ayyar, who is the head of Asia Pacific, with Luno a crypto exchange in Singapore, some of the leveraged Bitcoin buyers faced a flush out in the crash that took place on Saturday.
Although there were declines recently, Bitcoin is still up by more than 60% in the current year, which is a return that has exceeded many other assets. According to the President of El Salvador Nayib Bukele, the country had added 150 coins by purchasing the dip. This year, Bitcoin was adopted as legal tender in the nation.
