Only 5 Percent! Bitcoin Price Drops Again Earlier This Week

Bitcoin prices fell again on Monday, December 6. (photo credit: pixabay)

JAKARTA – After experiencing a sharp decline Saturday, December 4, Bitcoin fell again on Monday, December 6. But Monday's drop of 5% offered some respite for the world's largest cryptocurrency after a so-called battered weekend when, at one point, it lost more than a fifth of its value.

The rout sent bitcoin prices and the amount invested in bitcoin futures back to where they were in early October, before a massive price spike that sent the token to an all-time high of $69.000 on November 10. Since that record peak, bitcoin has fallen 32%. It was last down 1.1% at $48,900.

Traders said the weekend's decline was related to the broad movement of risk assets in traditional markets due to concerns about the Omicron variant of the coronavirus, combined with lower trading liquidity which is likely to plague cryptocurrencies at the weekend.

There is strong buying support, however, at the 200-day moving average, market participants said, with bitcoin fluctuating between $48.000 and $49.000.

Sean Farrell, head of digital asset strategy, at Fundstrat cites bitcoin's "massive correlation to macro uncertainty", compared to other crypto markets.

“We think this speaks to the extraordinary level of institutionalization of bitcoin over the previous 12 months as well as independent market dynamics across other cryptos,” Farrell was quoted as saying by Reuters.

“This may explain why there is so much capitulation in the bitcoin market… as legacy institutions seek to maintain annual gains towards the end of the year,” he added.

Crypto data platform Coinglass shows open interest - the total number of futures contracts held by market participants at the end of the trading day - across all recent exchanges at 16.5 billion US dollars compared to 23.5 billion US dollars on Thursday, and 27 billion US dollars on November 10.

"There's almost no liquidity on the weekends so the market is a bit more vulnerable to shocks - that and a lot of demand comes from institutions, and they don't trade over the weekend," said Joseph Edwards, head of research at crypto brokerage Enigma Securities in London as reported by Reuters.

Over the weekend, as the price dropped, investors who had bought bitcoin on margin saw the exchange closing their positions, causing a steady stream of selling. Retail-focused exchanges closed more than $2 billion in bitcoin long positions on Saturday, according to Coinglass.

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

Ben Caselin at Asia-based crypto exchange AAX said liquidity was thin as bitcoin moved from exchanges to offline digital wallets.

Ether, the world's second-largest cryptocurrency, also took a hit last Saturday, though not too hard. But it fell 3.1% on Monday to 4.070 dollars versus a November 10 high of 4.868 dollars.