- Bitcoin slid as much as 21% on Sunday and Monday, its biggest two-day drop since March, under pressure from risk aversion that also undermined stocks, while the dollar rose.
- The possibility of a second trial for Donald Trump, led by Democrats, encouraged safe haven flows into the dollar, which rose to their highest in two weeks.
- Bitcoin is still up roughly 89% over the past month.
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Cryptocurrencies tumbled on Monday, wiping out nearly $ 140 billion of total market value, as traders took profits from the dizzying rally so far this month, in light of a stronger dollar and growing political uncertainty.
Investors will be closely watching the possible impeachment of President Donald Trump and the increase in COVID-19 cases in Asia.
Bitcoin It’s down by as much as 21% on Sunday and Monday, its biggest two-day drop since March, although the cryptocurrency is still up nearly 89% on a one-month basis. Ethereum It decreased 12%. Smaller Coins XRP And the Litecoin They drop around 18% each.
The decline in cryptocurrencies on Monday saw nearly $ 140 billion from the entire market. Last week, the total value of The digital currency market surpassed $ 1 trillion for the first time ever.
Bitcoin last week hit a record high above $ 41,000, buoyed by a combination of dollar weakness, economic optimism and a wave of bullish sentiment towards cryptocurrencies, as big-name investors and investment banks tout their potential. Huge gains this year.
Read more: The chief information officer for a $ 500 million crypto asset manager breaks down 5 ways to evaluate bitcoin and decide whether to own it after the $ 40K digital asset breaks out for the first time.
Political uncertainty was mounting, undermining investor risk appetite for assets such as Stocks and commoditiesAs the Democrats prepared Trump impeached For the second time, after his perceived incitement to A. Right Gang That stormed the Capitol last week.
House Speaker Nancy Pelosi wrote to her colleagues on Sunday: “The horror of the constant assault on our democracy perpetrated by this president is increasing, as is the immediate need to act.”
“Rising bond yields and a stronger dollar have also reduced Bitcoin and gold prices this morning,” Rabobank strategists said in a note.
Bitcoin and other cryptocurrencies – like many commodities – tend to do the opposite of what the dollar does.
The correlation between Bitcoin and the Dollar Index is at -0.95, which means that the two are more likely to move opposite each other than not. Correlation is measured between 1.0 and -1.0, with the former indicating a positive correlation – two assets are liable to move in perfect tandem with each other – and the latter being the opposite.
The Dollars It was up 0.4% against a basket of major currencies, trading at its strongest in nearly two weeks, after falling to its lowest in 33 months last week.
Ethereum, the second-largest cryptocurrency by market capitalization after Bitcoin, fell 11.4% on Bitfinex, with the largest trading volume, according to Bloomberg data. The price has stabilized around $ 1,128, still in sight from last week’s highs in three years at $ 1,350.
However, analysts said the pullback is likely to be temporary, given the growing number of buyers and owners of cryptocurrencies.
“Some of the messy butterflies backing Bitcoin after anti-government types storm the Capitol Hill are backing down a bit. But the reason for the long coins staying in the new era technology drive and everything connected to blockchain technology hasn’t changed much,” Axi chief market strategist Stephen Innes said.
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