The price of bitcoin plummeted early Saturday, falling nearly $10,000 in roughly an hour to a temporary low of $42,000 before bouncing up to $45,000.
Bitcoin has fallen some $15,000 over the past 24 hours. Ether, the second-largest cryptocurrency by market capitalization, fell around $1,100 over the same time period.
The leading cryptocurrency reflected a broader drop in crypto markets, according to CoinDesk’s price index, with some cryptocurrencies falling more than 20% over the past 24 hours. Most of these assets appear to have suffered a sharp decline starting around 04:00 UTC Saturday.
According to CoinGecko, the overall market cap is currently hovering around $2 trillion.
Spot market selling seems to have driven the cryptocurrency lower. The decline triggered long squeeze in the derivatives market, which, in turn, led to a deeper slide.
“So far I’ve seen upwards of 4,000 BTC being sold that pushed the market abruptly down,” said Laurent Kssis, a crypto exchange-traded fund expert and director of CEC Capital. “In fact, 1,500 BTC alone was sold in less than a minute at the time of the drop.”
Data tracked by Coinglass shows the price drop has triggered nearly $600 million worth of bitcoin futures positions in less than an hour. The market appeared over-leveraged earlier this week with open interest (OI) elevated in bitcoin terms.
“The bitcoin denominated OI has now remained above 365,000 BTC for more than a month. It is not common to see such a high OI being sustained for such a long duration. This could suggest that the market is currently over-saturated with leverage,” Arcane Research’s weekly note published Tuesday said.
Tether (USDT), the world’s largest stablecoin by market value, saw a brief spike to $1.025 on the Nasdaq-listed Coinbase exchange, moving away from its usual 1:1 peg.
During sharp price declines, traders typically treat tether as a safe haven, given its value is pegged to the U.S. dollar, a traditional market risk-off asset.
The crash to the market’s lowest point since late September comes in the wake of uncertainties caused by the Omicron variant of COVID-19 and Federal Reserve’s (Fed) growing discomfort with high inflation. On Tuesday, Fed Chair Jerome Powell retired the word transitory from inflation discussion and said that the central bank might consider
Even so, some are using this fall as an opportunity to “buy the dip.” El Salvador President Nayib Bukele, whose country holds bitcoin on its balance sheet and has purchased coins during previous dips, announced another purchase of 150 BTC for around $48,700 each.
UPDATE (Dec. 4, 2021, 18:15 UTC): Corrects grammatical issues.