(Bloomberg) - Bitcoin plunged along with other cryptocurrencies on Saturday, in another indication of risk aversion spreading across financial markets.
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The largest digital token fell as low as $ 42,296 before reducing part of the decline. It was trading at around $ 48,300 at 10:31 a.m. in New York on Saturday, a drop of around 10%. The token is now down more than 20% from the all-time high of over $ 69,000 seen on November 10.
Ether, the second-largest token, fell as much as 17.4% before trimming the retracement to around 4%. The crypto sector as a whole has lost about a fifth of its value, sliding to $ 2.2 trillion, according to tracker CoinGecko.
It's not uncommon for cryptocurrencies, which are traded 24/7, to swing wildly on weekends. That's down to a few factors, including thinner trading volumes and a market structure consisting of hundreds of disconnected exchanges that are, in effect, their own islands of liquidity.
"As usual, since cryptocurrency traders deploy leverage, this results in cascading sell orders and settlements," said Antoni Trenchev, co-founder of cryptocurrency lender Nexo. โWe should find support around $ 40,000 to $ 42,000 and then bounce in line for a year-end rally. If that does not hold, we could revise the July lows of $ 30,000 to $ 35,000. "
The shifts in cryptocurrencies come amid a volatile period for financial markets. Rising inflation is forcing central banks to tighten monetary policy, threatening to reduce the liquidity tailwind that lifted a wide range of assets.
"The drop is likely partly due to technique, exacerbated by the derivatives market and not helped by the downside momentum behind high-growth stocks on Friday, with which Bitcoin has been positively correlated," he wrote Katie Stockton, founder and managing partner of Fairlead Strategies, an independent research firm focused on technical analysis.
The omicron variant of the coronavirus has also sparked risk aversion amid concerns about what it could mean for the global economic reopening.
World stocks have fallen more than 4% from a record in November, while safe havens such as Treasuries have rebounded.
Leveraged positions
Some leveraged buyers of Bitcoin were wiped out in Saturday's crash, according to Vijay Ayyar, head of Asia Pacific with crypto exchange Luno in Singapore.
"The markets have also been nervous with all the uncertainty surrounding omicron, and now there are cases in many countries," he said. "It's hard to say what that means for economies and markets, and therefore the uncertainty."
Despite the most recent drops, Bitcoin is still up more than 60% this year, a performance that outperforms many other assets, and El Salvador's President Nayib Bukele said the country had bought back the drop, adding 150 coins. This year, the nation adopted Bitcoin as legal tender.
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