Bitcoin was trading at around $48,000 on Friday afternoon, up from the morning’s low of $44,278 but registering a near 20% decline in just five days.
The cryptocurrency’s value had shed over $100 billion in market value since Sunday when it notched an all-time peak past the $58,000 level.
A quick rundown of bitcoin’s most dismal weekly performance since nearly 12 months ago indicates this week’s high volatility was not triggered by one factor.
The correction earlier this week was largely sparked by an overburdened derivatives market as traders scrambled to exit leveraged bets that had racked up as BTC pushed to an all-time-peak price past the $58,000 mark.
“It’s a market that was ridiculously overbought and will perhaps be so once again in the not-too-distant future,” Bloomberg quoted Craig Erlam, a senior market analyst at OANDA Europe, as saying in a Friday note.
Risk-on assets, according to Vijay Ayyar, Asia Pacific director of crypto exchange Luno in Singapore, are taking a heavy blow at the moment. The U.S. dollar is “strengthening,” he said, which is a good sign to expect a drop in Bitcoin and crypto in general.
Other major cryptocurrencies also saw their values drop in recent days, including Dogecoin (DOGE), Ethereum (ETHER), and Litecoin (LTC).
Bitcoin’s fragile state in the midst of market gyrations raises doubts about its viability as a safe-haven asset and hedge against inflation, a key contention among advocates of its impressive advance over the past year.
Comments by Tesla CEO Elon Musk may be partially responsible for bitcoin’s retreat in value. The weekend before the sell-off, he said that the price of the crypto did “seem high”.
Despite that, Bitcoin remains significantly high from this time in 2020, when the digital asset was only valued at less than $10,000, in part thanks to bets from the likes of Square, MicroStrategy, and Tesla.
Image courtesy of Journeyman Pictures/YouTube Screenshot
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