Shine Trader Limited reports:
El Salvador’s plan to make bitcoin legal tender does not appear to have gone down well with the market after bitcoin fell as much as 17% to a one-month low on Tuesday.
Bitcoin fell as low as $43,000 and plunged more than 10% in an hour after breaking through the closely watched $50,000 mark. The Bloomberg Galaxy Crypto Index, which tracks some of the largest cryptocurrencies, fell as much as 19%, while other smaller digital assets also sold off.
The rout is expected to accelerate, with more than 336,000 traders clearing positions and selling the equivalent of about $3.6 billion worth of bitcoin in the past 24 hours, according to cryptocurrency futures trading and information platform Bybt.
The cryptocurrency is undergoing its biggest test in its 12-year history as El Salvador becomes the first country to adopt bitcoin as legal tender. El Salvador’s President Nayib Bukele tweeted that the digital wallet used for the cryptocurrency project has been able to resume downloading after being temporarily shut down due to a technical glitch.
The wallet, called Chivo, is preloaded with $30 worth of Bitcoins, which can be obtained by registering with a Salvadoran id number.
Social media users like Twitter and Reddit are talking about collectively buying $30 worth of Bitcoin in support of El Salvador’s bitcoin law, which takes effect on September 7. The plan is reminiscent of GameStop.
Bukele also posted that Salvador took advantage of Tuesday’s drop to buy another 150 bitcoins, bringing his total holdings to 550.
Bitcoin has rallied nearly 75% since late July, and Tuesday was the biggest selloff since the rally began. Other cryptocurrencies that have rallied more recently have fallen even more sharply, with Cardano down 15% and Dogecoin down nearly 20%, according to CoinMarketCap.com.
Traders also pointed to seasonal factors as a cause for concern. September has been the only month in each of the past decade in which Bitcoin failed to post a positive return. In six of the past 10 years, bitcoin has lost more than 6% in September on average, according to the data.
Mike McGlone of industry research told the QuickTake Stock streaming show:
“I think there is some excessive speculation in the system.”
Ethereum, the second largest digital asset, fell from $3,900 to about $3,000 in a matter of minutes.
Shares of companies linked to cryptocurrencies also fell. Riot Blockchain Inc. At one point, Marathon Digital fell 10%, its biggest drop since July 27, while Marathon Digital fell 11%. Coinbase Global Inc., a provider of online trading platforms for digital currencies. Down as much as 5.7%, MicroStrategy Inc. Fell 9.5%.
Leah Wald, CEO of Valkyrie Investments, said:
“We used to see a lot of traders taking profits at psychological levels like $40,000 and $50,000. The market tends to sell off because of limit orders placed above these key price levels, or because stop-loss orders have been placed beyond these levels. They want to be safe in case of a pullback.”
Many analysts have been taken abounded by bitcoin’s rapid decline, and while the currency is known for volatility, the speed with which it plunged and recovered some of its losses has taken many by surprise.
Miller Tabak + Co. Matt Maley, chief market strategist, said:
“I didn’t expect bitcoin to rally on the El Salvador news, but the drop is very strange, especially since it happened in the middle of the morning rather than immediately after the news. If it was a hedge fund or brokerage misoperation, that wouldn’t be a problem. If there was something else going on, I would be concerned.”
Analyst Tony Spilotro said:
“Today [Tuesday] is one of the biggest days in bitcoin history, and one of the most fundamentally bullish moments is unfolding: the cryptocurrency officially becomes legal tender in El Salvador. But bitcoin prices did not react as expected. Instead, the market responded with a complete “blood bath” — bitcoin bottoming out at more than $10,000 below its session high. Does this mean the bitcoin rout is a ‘buy the rumor and sell the fact’ phenomenon?”
He added that investors or traders may not be bearish on Bitcoin, but profit-taking is never a bad idea. This may have had an unexpected effect on over-leveraged long traders, creating a knock-on effect of stop-losses that caused bitcoin to fall several milestones in a row.
Separately, the World Bank reiterated that it could not provide Bitcoin assistance to El Salvador due to environmental and transparency shortcomings.
Reprint indicated source：Shine Trader Limited Live information