What goes up must come down … and then back up?
Cryptocurrency markets were a sea of red Tuesday afternoon (Australia time) with many altcoins suffering double-digit losses after days of strong gains.
After breaking $US58,000 yesterday, Bitcoin sank as low as $US50,868.03 at 1.24am AEDT today, according to Coinmarketcap. The cryptocurrency was changing hands for below $US48,000 on some exchanges.
While Bitcoin had been trending down for several hours, the price plunge may have been tied to comments by the new US Treasury secretary, Janet Yellen, who told a New York Times event at about the same time that the cryptocurrency was “extremely inefficient” and highly speculative.
“I don’t think that bitcoin … is widely used as a transaction mechanism,” she said, according to CNBC. “To the extent it is used I fear it’s often for illicit finance. It’s an extremely inefficient way of conducting transactions, and the amount of energy that’s consumed in processing those transactions is staggering.”
Some media outlets also pointed to a tweet by Elon Musk saying that BTC and ETH “seem high” to explain the price plunge. But that tweet was posted on Saturday, a full 48 hours before the two cryptocurrencies began dropping.
That said, BTC & ETH do seem high lol
— Elon Musk (@elonmusk) February 20, 2021
In any case, nearly every crypto was in retreat on Tuesday afternoon.
Bitcoin was trading for around $US52,200 ($66,500), down 8.1 per cent in the past 24 hours (but up 9.4 per cent in the past seven days.
Ethereum was changing hands at $US1,728 ($2,170), down 10 per cent for the day and 3.4 per cent for the week.
According to TheBlockCrypto, traders who were long Bitcoin on leveraged futures markets like BitMEX and Bybit suffered $US634.5 million ($801.8 million) in liquidations – the most since January 11, when $US1.5 billion ($1.9 billion) was lost.
Liquidated long on XBTUSD: Sell 4,499,226 @ 48100.5 💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯💯🔥⚡ ~ BEYOND GODLIKE
— REKT (@BXRekt) February 22, 2021
There was also $24.8 million in liquidations on “decentralised finance” (defi) platforms like Compound that enable crypto holders to take out loans against their assets – as long as they stay above a certain price.
Of the top 100 coins, just 17 were in the green for the past 24 hours, according to Coingecko. (That includes six “stablecoins” that try to remain pegged to the US dollar, but often edge slighly higher in times of market volatility).
The Crypto.com coin was the best performing asset in top 100 in the past 24 hours, up 37 per cent to US19c.
DODO coin was the worst-performer, having fallen 20.1 per cent to $US5.14.
Crypto enthusiasts were hopeful this was just a temporary dip that didn’t signify the end of the bull market that has seen many altcoins explode fivefold or more since the start of the year.
Bitcoin down 10%. Can’t say I’m surprised tbh. I warned it was a bubble back in 2012.
— Joe Weisenthal (@TheStalwart) February 22, 2021
The story is #bitcoin has always been two steps forward, one step back, then two steps forward. Few understand this.
— Tyler Winklevoss (@tyler) February 22, 2021
— Bearing the Bull (@Guayeno) February 21, 2021