Sudden sell-off hits crypto market as bitcoin hits its lowest level in weeks
The price of bitcoin and the prices of many other popular cryptocurrencies suddenly plunged, sending bitcoin back below $22,000 in the early morning hours on Friday. The plunge sent the cryptocurrency to its lowest level in more than three weeks. The prices of Ether, Binance Coin, Solana and Cardano also suddenly fell at the same time.
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The crypto market sells off… Suddenly
The reason for the sudden, sharp drop is unclear at the time of writing, although it came during a sudden sell-off in early European crypto trading. According to data from CoinDesk, the bitcoin price briefly fell from $22,738 to below $21,500 at 2:30 a.m. Eastern.
But within 10 minutes it rallied to just under $22,000. Hours later, bitcoin was trading at around $21,392. The sudden sell-off in the crypto market came not long after the largest cryptocurrency by market capitalization climbed above $25,000 for the first time since June, climbing alongside US stocks.
Ether price fell from $1,808 to $1,728 at the same time as bitcoin fell before recovering a bit. At 3:05 am Eastern, ether was trading at $1,733, a price it has not seen since August 10. A few hours later, the cryptocurrency had fallen even more to $1,691.
Is the crypto winter continuing?
In an early morning email, OANDA’s Craig Erlam warned that crypto winter may not be over yet.
“Bitcoin has been sent into a tailspin at the end of the week, falling very sharply and suddenly in early European trading,” he wrote. “It fell more than 5% in a very short period of time, and while the trigger is not ready, the fact that it has barely recovered any of those losses suggests there is substance to the move.”
He added that the plunge below technical support at $22,500 could be significant if it holds, setting the stage for the next test of support at $20,000. Since Erlam’s email, the bitcoin price has held its low level, paving the way for a test of the next support level.
Why the sudden sale?
Simon Peters, a crypto market analyst at eToro, told CNBC that the sudden sell-off in the crypto market may have come as US stock markets have fallen since the release of the minutes of the Federal Reserve’s July meeting. The primary takeaway from those minutes was that the Fed is likely to continue raising interest rates until inflation has stabilized across the board.
Peters believes the Fed news has finally filtered through to the crypto markets, triggering a selloff. He also noted a large liquidation of long positions in bitcoin’s perpetual futures markets. Citing data from Coinglass, Peters said today was the biggest liquidation of long futures positions since June 18. That was the date when bitcoin hit its lowest price so far this year of around $17,500.
This data shows that 156,155 traders liquidated more than $537 million from the crypto market in the last 24 hours, with bitcoin leading the liquidations at over $200 million, followed by ether at over $130 million. Decrypt pointed out that most of these liquidations came from “blown out long positions.”
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