Bitcoin extended losses on Tuesday, falling to the lowest level since August after a global selloff in riskier assets took the overall value of the cryptocurrency market back below US$2-trillion.
The largest digital coin fell as much as 7.6% to $40 237 before paring some of the decline. Second-biggest token ether was trading below $3 000, while cardano, solana, polkadot and dogecoin also fell, according to tracker CoinGecko. All were trading off their lows for the day.
Virtual currencies were roiled amid fears of contagion from the liquidity crisis at China Evergrande Group, the world’s most indebted developer. A global stock retreat abated somewhat in Asia on Tuesday, though Evergrande’s woes and the looming Federal Reserve meeting remain potential triggers of volatility.
“Bitcoin and ether are getting swept up in the risk-off momentum that has been gaining since late last week,” said Adam Reynolds, chief executive for Asia-Pacific at Saxo Capital Markets. He expects “more liquidation to come”.
About $1.4-billion of cryptocurrency liquidations occurred in the past 24 hours, according to data from Bybt.com. These happen when leveraged positions are closed by exchanges for failing to meet margin requirements.
From a technical perspective based on bitcoin’s price charts, the token has traced a hammer pattern right above the lower border of a so-called Ichimoku cloud. That suggests the next key support level to watch for is about $39 900.
Katie Stockton, founder of Fairlead Strategies, flagged the same level as a potential support in a note, while adding bitcoin is still in a long-term uptrend.
Bitcoin is up more than 40% in 2021, while ether has quadrupled.
Cryptocurrencies remain controversial investments. Some see them as highly volatile and purely speculative with little intrinsic value, while others argue institutional adoption will grow, tempering volatility and supporting prices. — Reported by Joanna Ossinger, (c) 2021 Bloomberg LP