Bitcoin’s weekend plunge hints at increasing influence of Wall Street traders

Bitcoin’s difficult weekend marked the first time that the storm of traditional financial assets triggered a huge wave of cryptocurrencies, highlighting the growing role of large investors in the digital asset market.

According to the FT Wilshire Hybrid Bitcoin Price Index, which tracks leading cryptocurrency exchange transactions, the price of the largest cryptocurrency by market capitalization fell by $10,000 to $42,222 in just 60 minutes in the early hours of Saturday morning in London.

There was a 20% rapid decline just a few hours after the turbulent week on Wall Street ended, when stocks and bonds fluctuated significantly due to potential changes in monetary policy and the spread of the new coronavirus.

The weekend shock of cryptocurrencies shows that this usually somewhat independent market is becoming more closely linked to these traditional assets, especially now that large institutional investors are more involved.

“This started with the hedging measures of the traditional macro circle [which] It has triggered some cryptocurrency liquidation,” said David Fauchier, portfolio manager of digital asset expert Nickel Digital, noting that investors who sell stocks are also eager to sell Bitcoin. Unlike other markets, Bitcoin can be traded on weekends.

Joshua Lim, Head of Derivatives Trading at Genesis Trading, said, “During the first large-scale liquidation event since September, bets worth more than $2.5 billion have deteriorated,” he said. Empty. As Binance.

In crypto futures exchanges, when the price of a digital token reaches a certain threshold (called Liquidation price.

Lim added that this rapid decline also wiped out positions worth more than $5 billion in the traditional futures market. Investors can bet on the price of cryptocurrencies in the traditional futures market, reducing the number of outstanding bets by nearly four cents. one.

The price of Bitcoin has risen by more than 500% in the past two years, and some investors-mainly amateur retail investors, but also some professionals-are attracted by theories that returns may not be related to other assets. But as more and more hedge funds and other large investors participate, they have become increasingly connected with other markets.

Jan Stromme, founder of crypto trading company Alphaplate, said that many professional investors are also keen to convert book gains into actual returns before the end of the year, which has led to a sell-off.

“I expect the risk sentiment of the traditional market to be [digital ones],” Faucier added.

The resurgence of the coronavirus, weak employment data, and Fed Chairman Jay Powell’s remarks suggesting that interest rates have risen earlier than expected have prompted investors to reconsider their bets and transfer those booming assets when global growth is strong.

“[Bitcoin’s sell-off gathered pace] As the overall market unease escalates,” Lin said. This reminds us that although Bitcoin is regarded as one of the safer cryptocurrencies, it is tight in the market compared to more volatile bets such as Dogecoin. The moment is still fragile.

Prices failed to fully recover on Monday, and Bitcoin was trading at $48,900.

Professional investors involved in cryptocurrencies usually lack a near-religious belief in digital assets, which is common among the die-hard fan base of retail investors who insist on holding digital coins no matter what happens.

Beat Nussbaumer, a Swiss foreign exchange trader and portfolio manager, said: “We have to think that it is just another risk asset that will rebound when the world situation improves and sell when the situation is bad.” He said that cryptocurrency Early retail buyers of ”welcomed institutional investors into the market in the hope that they could push up prices, but the sell-off over the weekend showed that it also introduced new loopholes.

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