It was an eventful weekend for Bitcoin as a storm in the traditional financial asset market for the first time caused major impacts in the cryptocurrency market, underlining how big Wall Street investors are playing an increasing role in the digital asset markets.
The price of the largest cryptocurrency by market capitalization fell by ten thousand dollars in just 60 minutes in the early hours of Saturday morning London time to reach 42.2 thousand dollars, according to the Financial Times Well share Bitcoin Price Index, which tracks trading on leading crypto platforms.
The rapid 20% drop came just hours after closing a volatile week on Wall Street, as stocks and bonds moved sharply in response to potential shifts in monetary policy and the spread of the new strain of coronavirus.
Data from Crypto indicates that the cryptocurrency market - somewhat separate - has become closely linked to those traditional assets in the money markets, especially now that large investors are becoming more involved in it.
Investors who were selling shares were also quick to dump bitcoin, which can be traded on weekends, unlike money markets, said David Foucher, portfolio manager at digital asset firm Nickel Digital.
Joshua Lim, head of derivatives trading at Genesis Trading, explained that selling pressure from professional investors led to a liquidation of bets on cryptocurrency trading platforms such as Binance.
The founder of the cryptocurrency exchange Alphaplatt, Jan Strom, revealed that many professional investors were also keen to crystallize the fiat winnings into real returns before the end of this year, which contributed to the sell-off.
The emergence of the novel coronavirus, weak jobs data, and comments from US Federal Reserve Chairman Jay Powell hinting at an earlier-than-expected interest rate hike has prompted investors to rethink their bets and abandon assets that thrive when global growth is strong.
“The acceleration in the bitcoin sell-off coincided with rising general market tensions,” Joshua Lim said. He added, “This provides a reminder that while Bitcoin is seen as one of the safest cryptocurrencies, compared to more volatile ones like Dogecoin, it remains vulnerable in moments of market stress.”
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