A massive crash that began Friday seems to have no let up until Saturday, taking the top cryptodcurrencies into a long, winding free fall.
All the 20 largest tokens by market capitalization have dipped in the double digits over the last 24 hours, Decrypt reported. On Saturday, their plunge continued as per CoinDesk's real-time tracker, with Bitcoin dropping 8.10 percent to $49,459.14 and Ethereum taking a further 1.87-percent nosedive to $4,148.18. Polkadot, meanwhile, slid 12.39 percent to $29.55. Dogecoin also fell 9.53 percent to $0.180359, while Solana dropped 3.15 percent to $195.40.
Bitcoin Loses $20,000 In Value Since November Record High
Since reaching a record-high in November, hitting $69,000, Bitcoin lost nearly $20,000 in value, or around 32 percent, since then, as the other cryptocurrencies likewise suffered a double-digit tumble in the last two days. Ethereum plummeted 16 percent on Saturday morning to its new low of $3,500.
Friday's crash wiped out over $500 billion in the total crypto market capitalization, resulting in a 16 percent drop to around $2.3 trillion. When Bitcoin reached an all-time high, the total market cap hit a record of more than $3 trillion.
The crypto market crash coincided with a similar slump in the U.S. stock market, a Markets Insider report said. At Friday's close, the tech stock-driven Nasdaq ended nearly two percent down to 15,085.47, and the Dow Jones Industrial Average slid 0.17 percent to 34,580.08. The S&P 500 also went down 0.85 percent to 4,538.42. Risky tech stocks were the biggest losers on Wall Street, with Tesla dropping six percent. As investors turned their backs on tech, the crypto space followed.
Omicron Spread, Fed Interest Rate Hike Seen as Factors Behind Crash
These are due to the growing economic uncertainty arising from the worldwide spread of the Omicron coronavirus variant and expectations that the U.S. Federal Reserve will hike interest rates to cushion rising inflation. This in addition to rumored Fed tapering, wherein it is set to decrease the amount of assets it is purchasing. Such Fed tapering could lead to what the popular investor Louis Navellier told the Anadolu Agency in Turkey: the bursting of the Bitcoin and crypto bubble. Navallier added that the Fed tapering would lead to a "correction in risk assets, of which Bitcoin is a part." With this, Bitcoin would face a price drop of below $10,000, Navellier added.
Another reason for the decline is the seasonal selling of assets by the end of the year, where investors would lock in on gains and resort to profit taking, Yahoo! Finance noted. But even with this immense drop, Bitcoin remains up 66 percent year-to-date, having started the year at around $29,400.
Analysts also point to a derivative-induced selling event. All-Star Charts technical research chief market strategist J.C. Parets told CNBC that "leverage was flushed from the system in a violent fashion." But he noted that just like a similar incident in the September flash crash, the market eventually moved "higher toward a new all-time high in October."
Of all the factors, the severity or regression of the Omicron COVID-19 variant would be the most crucial to determine the immediate future of the financial markets, including the crypto space, analysts added.