Bitcoin extended its decline on Saturday, and has shed more than 50% from its record high in November while adding further momentum to the meltdown in cryptocurrencies.
“Margin positions being liquidated caused a wave of additional sell pressure, as assets that had been held as collateral were forcibly sold to pay for margin loans,” said Hayden Hughes, chief executive officer at Alpha Impact in Singapore.
Bitcoin’s decline from its peak has wiped out more than $600 billion in market value, and over $1 trillion has been lost from the aggregate crypto market. While there have been much larger percentage drawdowns for both Bitcoin and the aggregate market, this marks the second-largest ever decline in dollar terms for both, according to Bespoke Investment Group.
Bitcoin fell as low as $34 042.78 Saturday, a drop of 7.2%, before paring most of those losses. Other digital assets also slid, with Ethereum down 12%. Solana and Cardano each fell at least 17%, according to Coinbase.
“I would expect it to take some time for a bottom to form and for confidence to return, before expecting any sort of bullishness,” Hughes said.
With the Federal Reserve’s intentions on reining in inflation rocking both cryptocurrencies and stocks, a dominant theme has emerged in the digital-asset space: cryptos have moved in the same way as equities and many other risk assets.
And the case for further caution was reinforced on Friday. Bloomberg News reported that the Biden administration is preparing to release an initial government-wide strategy for digital assets as soon as next month and will ask federal agencies to assessing the risks and opportunities they pose.