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Ether, the second-largest currency, fell as much as 17.4 percent before settling at about 10 percent.
Bitcoin sank along with other cryptocurrencies, in another indication of risk aversion spreading across financial markets. The largest digital token fell as low as $ 42,296 before reducing part of the decline.
It was trading at around $ 48,300 as of 10:31 a.m. in New York on Saturday, a drop of about 10 percent. The token is now down more than 20 percent from the all-time high of over $ 69,000 seen on November 10.
Ether, the second-largest currency, fell as much as 17.4 percent before settling at about 10 percent.
The crypto sector as a whole has lost about a fifth of its value, sliding to $ 2.2 trillion, according to tracker CoinGecko.
It is not uncommon for cryptocurrencies, which are traded 24 hours a day, seven days a week, to swing wildly on weekends. That’s due to a few factors, including thinner trading volumes and a market structure consisting of hundreds of disconnected exchanges that are, in effect, their own islands of liquidity.
“As usual, since cryptocurrency traders deploy leverage, this results in cascading sell orders and settlements,” said Antoni Trenchev, co-founder of cryptocurrency lender Nexo.
“We should find support around $ 40,000 to $ 42,000 and then bounce in line for a year-end rally. If that is not maintained, we could revise the July lows from 30,000 to 35,000. “
The shifts in cryptocurrencies come amid a volatile period for financial markets. The spike in inflation is forcing central banks to tighten monetary policy, threatening to reduce the liquidity tailwind that lifted a wide range of assets.
“The drop is likely partly due to technique, exacerbated by the derivatives market and not helped by the downside momentum behind high-growth stocks on Friday, with which Bitcoin has been positively correlated,” he wrote. Katie Stockton, Founder and Managing Partner of Fairlead Strategies, an independent research firm focused on technical analysis.
The omicron variant of the coronavirus has also sparked risk aversion amid concerns about what it could mean for the global economic reopening.
World stocks have fallen more than 4 percent from a record in November, while safe haven assets like Treasuries have rebounded.
Leveraged positions
Some leveraged buyers of Bitcoin were wiped out in Saturday’s crash, according to Vijay Ayyar, head of Asia Pacific with crypto exchange Luno in Singapore.
“The markets have also been nervous with all the uncertainty surrounding the omicron, and now there are cases in many countries,” he said. “It’s hard to say what that means for economies and markets, and therefore uncertainty.”
Despite the most recent drops, Bitcoin is still up more than 60 percent this year, a performance that outperforms many other assets, and El Salvador’s President Nayib Bukele said the country had bought back the drop, adding 150 coins. This year, the nation adopted Bitcoin as legal tender.
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