Bitcoin shed nearly a third of its value on Saturday as a combination of profit taking and macro-economic concerns led to nearly $1 billion selling across cryptocurrencies.
Bitcoin fell 12 percent at 9.20 GMT to $47,495 (€41,980.83). It fell to $41,967.50 (€37,095.07) during the session, bringing the total losses for the day to 22 percent.
By 22.01 GMT, it rebounded slightly to $4,875.25 (€43.092.03) after losing $4,991.54 (€4412.02) from its previous close.
The massive sell-off in cryptocurrencies also saw Ether, the currency linked to the Ethereum blockchain, drop by more than 10 percent.
It also rebounded to losses of 3.61 percent to $4,070.52 (€3,597.93), and lost $152.28 (€134.60) from its previous close.
According to cryptocurrency data platform Coingecko, the market capitalization of the coins tracked by 11,392 coins fell by nearly 15 percent to $2.34 trillion (€2.07 trillion). That value briefly exceeded $3 trillion (€2.65 trillion) last month, when bitcoin hit a record high of $69,000 (€60,989).
Why did the markets crash?
This drop comes on the heels of a volatile week in financial markets. Global stocks and record US bond yields fell on Friday after data showed US job growth slowed in November and the Omicron variant of the coronavirus kept investors on edge.
Justin DeAnthan, head of exchange sales at Hong Kong-based crypto exchange EQONEX, said he has been watching the increase in leverage ratios across the crypto markets as well as how major holders have been moving their coins from wallets to exchanges. The latter is usually a sign of intent to sell.
“It appears that whales in the crypto space have moved coins into a niche, taking advantage of bullish bias and leverage from retail traders, and then driving prices lower,” he said.
The sale also comes ahead of testimony from executives from eight major crypto companies, including Coinbase Global CFO Alesia Haas and FTX Trading CEO Sam Bankman-Fried, before the US House of Representatives Financial Services Committee on December 8.
The hearing marks the first time that major players in the cryptocurrency markets will testify before US lawmakers, as policymakers grapple with the implications for cryptocurrency and how to best regulate it.
Cryptocurrency traders turn bearish
Last week, the US Securities and Exchange Commission (SEC) rejected WisdomTree’s second cryptocurrency exchange fund proposal.
Data from another platform Coinglass showed that nearly $1 billion (€883.9 million) in cryptocurrency has been liquidated over the past 24 hours, the bulk of which was in digital exchange Bitfinex.
“If anything, this is the opportunity to buy a dip to many investors who may have previously felt they missed the boat. We can see the rope being bought at a higher price, which indicates that people are preparing cash, within the crypto space, to do just that this D’Anethan said, referring to the largest stablecoin in the cryptocurrency world.
The drop in Bitcoin funding prices — the cost of holding bitcoin across perpetual futures contracts that peaked at 0.06 percent in October — also showed that traders have turned bearish.
Funding rate on crypto exchange BitMEX has fallen to minus 0.18 percent from 0.01 percent levels for most of November.