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December 7, 2021

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Battered bitcoin slides 5% more after weekend dive

Bitcoin tumbled almost 5 percent yesterday as the start of the week offered little respite to the world’s largest cryptocurrency after a bruising weekend where at one point it lost over a fifth of its value.

The rout sent bitcoin’s price and the amount invested in bitcoin futures back to where they were in early October, before a massive price surge that sent the token to an all-time high of US$69,000 on November 10.

Traders said the weekend fall was connected to a broad move away from riskier assets in traditional markets over worries about the Omicron variant of the coronavirus, combined with lower trading liquidity that tends to plague cryptocurrencies at weekends.

“Our expectation is the rest of Q4 will be a hard month; we aren’t seeing the strength in bitcoin that we generally see after one of these crushing days,” said Matt Dibb at Stackfunds, a Singapore-based crypto fund distributor.

“Leverage markets have been completely reset, and open interest within leverage markets has completely reset.”

Crypto data platform Coinglass showed open interest — the total number of futures contracts held by market participants at the end of the trading day — across all exchanges was last at US$16.5 billion compared with US$23.5 billion on Thursday, and as much as US$27 billion on November 10.

“There’s barely any liquidity on weekends so markets are slightly more vulnerable to shocks — that and a lot of demand coming from institutionals, and they’re not trading over the weekend,” said Joseph Edwards, head of research at crypto brokerage Enigma Securities in London.

Over the weekend, as prices fell, investors who had bought bitcoin on margin saw exchanges close their positions, causing a cascade of selling. A range of retail-focused exchanges closed more than US$2 billion of long bitcoin positions on Saturday.

Some exchanges allow traders to place bets 20 times or more the size of their investment, meaning a small move in the wrong direction can cause exchanges to liquidate clients’ positions when their initial investment is gone.

Ben Caselin at Asia-based crypto exchange AAX said liquidity had become thin because of bitcoin moved off exchanges to offline digital wallets.

Ether, the second-largest cryptocurrency, was also hit on Saturday. It tumbled 5.5 percent to US$3,965, from a November 10 high of US$4,868.


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