Bitcoin Crashes 20%, $1 Billion Worth of Liquidations

Hello, and welcome to the latest edition of Overbit Insights.

On Saturday, Bitcoin lost a fifth of its value due to profit-taking and macro-economic concerns, resulting in roughly a billion dollars worth of selling across cryptocurrencies. Ether, which is tied to the Ethereum blockchain network, has dropped more than 10% due to the cryptocurrency selloff.

The market capitalisation of the 11,392 currencies tracked by cryptocurrency analytics platform Coingecko fell over 15% to $2.34 trillion, with reportedly more than $1 billion in liquidations piling up on a Saturday, Dec. 4 move.

Justin d’Anethan, the Hong Kong-based head of exchange sales at cryptocurrency exchange EQONEX, said he’d been keeping an eye on the rise in leverage ratios in the cryptocurrency markets, as well as how major investors were shifting their coins from wallets to exchanges.

“Whales in the crypto space seem to have transferred coins to a trading venue, taken advantage of a bullish bias and leverage from retail traders, to then push prices down,” D’Anethan said.

The selloff comes ahead of testimony before the US House Financial Services Committee on Dec. 8 by officials from eight prominent cryptocurrency companies, including Coinbase Global CFO Alesia Haas and FTX Trading CEO Sam Bankman-Fried. As policymakers deal with the consequences of cryptocurrencies and how to regulate them effectively, the hearing will be the first time prominent actors in the crypto markets will testify before US Congress.

According to data from another site, Coinglass, approximately $1 billion worth of cryptocurrencies were sold in the last 24 hours, with the majority of the transactions taking place on digital exchange Bitfinex.

The cost of holding bitcoin via perpetual futures, which peaked at 0.06 per cent in October, has also fallen, indicating that traders have turned negative. The financing rate on BitMEX, a cryptocurrency trading platform, decreased to a negative 0.18 per cent from 0.01 per cent for the most of November.

While it’s impossible to say where things go from here, d’Anethan certainly seems optimistic about the current ‘discount’, as some would say.

“If anything, this is the opportunity to buy the dip for many investors who might have previously felt like they missed the boat. We can see tether bought at a premium, suggesting people are getting cash ready, within the crypto space, to do just that,” D’Anethan said, referring to the most significant stable coin in the cryptocurrency world.

Closing out today’s edition of Overbit Insights, we take a look at some recent market data surrounding the US dollar and how it may have impacted the current equities and commodities moves.

According to Reuters calculations and US Commodity Futures Trading Commission data released on Friday, speculators’ net long position on the US dollar reached its highest level since mid-June 2019.

For the week ending Nov. 30, the value of the net long dollar position was $23.99 billion, up from $22.11 billion the week before. With this move, the net long position in the US dollar has increased for the second week in a row.

The greenback had a net long position of $24.435 billion this week, up from $21.964 billion the week before, in a broader measure of dollar positioning that includes net contracts on the New Zealand dollar, Mexican peso, Brazilian real, and Russian rouble.

Despite the introduction of the highly transmissible Omicron coronavirus subtype, net longs in the US dollar surged after Federal Reserve Chair Jerome Powell offered aggressive testimony early this week.

Last week, the dollar index reached its highest level since July 2020, before finishing the week with a bit of gain. According to Jane Foley, further increases for the dollar would be challenging, though, director of FX strategy at Rabobank in London.

The opposite seems to have been confirmed in cryptocurrencies, with net short holdings in bitcoin futures increasing to 1,691 contracts, up from 160 contracts the previous week, the lowest level since mid-January 2019.

Concerns about the Omicron version have hit bitcoin, as they have many other risk assets, and investors are seemingly fleeing into cash.

Thanks as always for reading Overbit Insights – have a great day!

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