Bitcoin enters December shaken and scarred by extreme volatility |
We are in the midst of a Bitcoin winter. The price has fluctuated dramatically over the last few months and many people have lost their confidence on what they thought was an uncorrelated asset class.
“Bitcoin enters December shaken and scarred by extreme volatility.” Bitcoin has been in a volatile state for the past few months, with its price fluctuating wildly. Read more in detail here: bitcoin volatility.
The crypto industry’s extraordinary volatility was compounded by significant liquidations in the futures market towards the end of November.
According to Glassnode statistics, Bitcoin fell from a high of $59,000 to a low of $45,000 over the weekend, bringing the market down by as much as 35% from its all-time highs reached in early November.
Bitcoin is in the red due to a new malware type and Federal Reserve concerns.
Bitcoin suffered a severe setback last week as the market plunged deep into the red, after surging to just short of $60,000. The massive shakedown wasn’t limited to the crypto business; the entire financial system was struck hard as well, with stock values plummeting across exchanges.
Bitcoin, which has been a driving force in the crypto market, fell to a low of $45,000 on Sunday after soaring to a high of $59,000. The market was pulled down by the 35 percent drop from the all-time high hit in early November, with practically every cryptocurrency seeing major losses.
The open, high, low, and close (OHLC) candlestick chart of Bitcoin’s price in USD is shown in this screenshot. (Image courtesy of Glassnode)
Panic selling by traders trying to beat the market triggered the severe volatility. Chairman Jerome Powell of the Federal Reserve said last week that the central bank is contemplating slowing down the pace of monthly asset purchases, which would allow the Fed to increase interest rates as soon as next spring.
This just contributed to the fire started by the coronavirus’s new strain. Massive liquidations in the futures market intensified the sell-off sparked by the rumors. The prolonged peak levels of open interest in the Bitcoin futures market, according to Glassnode data, laid the groundwork for a high volatility event. The selling pressure on Bitcoin created a cascade of long liquidations as the weakening in legacy markets drove all assets below.
“While the cryptocurrency industry is notorious for its volatility and possible price increases, the weekend correction seemed to undermine confidence in the sector as a whole,” said Walid Koudmani, a market analyst at financial firm XTB.
$5.4 billion in open interest in Bitcoin futures was swept away, wiping out 24.5 percent of the market’s entire value.
From November 27th, 2021 to December 5th, 2021, the open interest in Bitcoin futures on all exchanges was charted (Source: Glassnode)
“As BTC trades around $47,000 and investors depend on news to determine the seriousness of the problem,” Koudmani noted, “the scenario seems pretty murky today.”
Not everything, however, is as grim as the graphs imply. On-chain data seems to back with analyst expectations, with the majority believing that a loss floor has been established. Despite Bitcoin’s dominance being at an all-time low in recent months, according to Koudmani, it’s not always a harbinger of a bear market.
“It’s worth noting that, despite the fact that prices fell across the board, a glance at the ETH/BTC chart shows that a large portion of the money went into Ethereum rather than the major currencies.”
It’s also worth mentioning that the majority of the tokens dumped on spot markets belonged to first-time buyers. Since the recent all-time high and downturn, 97 percent of Bitcoin’s supply older than three months has remained unspent, according to Glassnode.
“In general, despite great volatility and losses, this displays tremendous conviction.” “Quite a difference to the pricing activity this week,” the business said in its most recent report.
Graph depicting Bitcoin’s supply in 2021 divided by coin age (Source: Glassnode)
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