Bitcoin reportedly plunged along with other cryptocurrencies over the weekend, in another indication of the risk aversion sweeping across financial markets as the Omicron variant of coronavirus spreads.
The largest cryptocurrency fell as low as US$42,296 before paring some of the tumble. It, for instance traded at about $47,600 in Singapore, a drop of about 11%.
Meanwhile, ether, the second largest token, fell as much as 17.4% before trimming the decline to about 10%. The overall crypto sector has also shed around a fifth of its value, sliding to $2.2 trillion, according to tracker CoinGecko.
The swings in cryptocurrencies come amid a volatile period for financial markets. Spiking inflation is forcing central banks to tighten monetary policy, threatening to reduce the liquidity tailwind that lifted a wide range of assets.
The Omicron variant of the coronavirus has also led to risk aversion over concerns about what it might mean for global economic reopening.
Global stocks are down more than 4% from a record in November, while haven assets like treasuries have rallied.
Some leveraged buyers of bitcoin were flushed out in Saturday’s crash, according to Vijay Ayyar, head of Asia Pacific with crypto exchange Luno in Singapore.
“Markets have also been jittery with all the uncertainty around Omicron, with cases now appearing in many countries,” he said. “It’s hard to say what that means for economies and markets and hence the uncertainty.”
About $2.4-billion of crypto exposure, both long and short, was liquidated on Saturday, the most since 7 September, according to data from Coinglass.com.
Bitcoin, famed for its volatility, has shed about $21 000 since hitting a record on 10 November.
As usual, since crypto traders deploy leverage, it results in cascading sell orders and liquidations
But it’s still up more than 60% this year, a return that exceeds many other assets — and El Salvador’s President Nayib Bukele said the country had again bought the dip, adding 150 coins. The nation this year adopted bitcoin as legal tender.
“As usual, since crypto traders deploy leverage, it results in cascading sell orders and liquidations,” said Antoni Trenchev, co-founder of crypto lender Nexo. “We should find support around $40 000 to $42 000 and then rebound in line for a end-year rally. If that does not hold, we might revisit the July lows of $30 000 to $35 000.”