Bitcoin tried to stage a comeback on Sunday, but gave back gains almost as quickly as they came in early afternoon trading.
While earlier up 1.99% to $49,321.65, as tracked by the crypto news website CoinDesk, Bitcoin fell back 1.3% as of 2:32 p.m. Eastern Time, to around $48,506.
Bitcoin’s early-hours drop on Saturday built on losses that started a month ago and gathered steam after the Federal Reserve said monetary support for markets will start going away soon. On Saturday, Bitcoin shed 20% before recovering some, in trading that had it losing about $10,000 an hour, CoinDesk said..
Bitcoin, the largest cryptocurrency by market value, dropped to $42,000 at midnight Eastern Time on Saturday before recovering. Including that drop, its value has declined about 29% since its all-time high on Nov. 8, around the same time that speculative stocks started to slide.
Losses appear related to uncertainties over the Omicron variant of coronavirus and Fed Chair Jerome Powell’s remarks to Congress last week that the central bank would hasten the wind-down of its pandemic bond-buying program in response to inflation. The stock market also pulled back.
Cryptocurrencies are much more volatile than stocks or government-issued currencies. Other cryptocurrencies also fell sharply at the start of the weekend, in a sign that investors are pulling away from riskier bets.
Ether, the second-largest cryptocurrency, also fell by more than 15%, but had erased that loss Sunday to trade slightly higher. Other widely traded cryptocurrencies including Solana, Dogecoin and Shiba Inu coin traded lower.
Saturday’s drop pulled the total market value of the crypto universe down nearly $400 billion to around $2 trillion, before recovering to around $2.2 trillion, according to CoinMarketCap.com, MarketWatch reported.
NYDIG, a technology and financial services firm dedicated to Bitcoin, on Saturday estimated that $1.1 billion of leveraged bitcoin positions and $2.5 billion of crypto leveraged positions (including Bitcoin) had been liquidated in the past 24 hours, representing the largest such notional liquidation since Sept. 7.
NYDIG also suggested it was seeing positive trends for bitcoin and crypto: “On our desk, we have seen two-way flows today with 84% of the flows being buys on our trading desk excluding tax loss harvesting trades,” NYDIG wrote Saturday.
Another factor that may have accelerated the Bitcoin selloff was the unwinding of heavily leveraged crypto derivatives, Noelle Acheson, head of market insights at cryptolender Genesis Global Trading, told The Wall Street Journal. She pointed to a large sell order that might have triggered margin calls and liquidations for investors.
El Salvador President Nayib Bukele announced Saturday that his country had “bought the dip,” snapping up150 coins for an average of $48,670 each. He later wrote that the country had missed the bottom “by 7 minutes,” followed by a laughing emoji. El Salvador in September became the first country to adopt bitcoin as a national currency.
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