Bitcoin was hit by a sharp sell-off on Tuesday, November 20, 2018, sliding to its weakest level of the year and briefly falling below $4,300 as traders dumped the world’s best-known cryptocurrency.
The move deepened a brutal week for the digital asset, which had already lost roughly a quarter of its value after a sudden drop the previous week broke a long stretch of relative calm around $6,500.
At its lowest point, bitcoin touched $4,327, its weakest price since October 2017. It later recovered some ground and was changing hands at about $4,750 on Bitstamp by mid-afternoon.
Market participants said the decline was being driven by heavy liquidation on leveraged Asian exchanges, where speculative trading is more common than on many Western platforms. Hong Kong-based OKEx and Bitmex were among the venues cited by traders.
Mati Greenspan, senior market analyst at eToro, said the market had been building up pressure for some time. “We’d been waiting for a break-out,” he said. “When you have the price moving so steadily you had lots of stop-loss orders building up - and now you are seeing them being liquidated.”
Ripple’s XRP and Ethereum’s ether, the second and third-largest cryptocurrencies, also fell sharply before trimming losses later in U.S. trading. XRP dropped as much as 14 percent and ether as much as 16 percent.
The broader financial backdrop was also weak. European shares fell after poor retail results, while weakness in Apple Inc helped drag Wall Street lower.
Bitcoin’s decline came after a year of extraordinary losses. The cryptocurrency had already fallen more than 75 percent in 2018 from its peak of $20,000 reached in December 2017, when retail investors piled into what many analysts described as one of the biggest bubbles in history.
Some traders also pointed to last week’s “hard fork” in bitcoin cash, which split the fourth-largest cryptocurrency into two separate coins, as another source of market anxiety. Bitcoin has often reacted sharply to disputes over changes to its underlying network, and the suspension of a planned hard fork by major developers and investors in 2017 was a major factor behind its rapid rise that year.
Michael Moro, chief executive of Genesis Global Trading in New York, said leverage was a major part of the problem. “The presence of leverage makes day traders attracted to Asian markets,” he said. “Folks who are risking 100X type of leverage, it’s really difficult to think of that as an investment – it’s a casino mentality.”
Mainstream investors have largely stayed away from bitcoin because of thin regulation, weak market infrastructure and extreme price swings. That has also limited its use as a payment currency in 2018, even as supporters argue that virtual currencies still have a long-term role outside the banking system.
According to Coinmarketcap.com, the total value of all cryptocurrencies had fallen to about $154 billion from roughly $800 billion in January. By late afternoon, XRP was trading around $0.45 and ether around $142 on the Luxembourg-based Bitstamp exchange.
Fawad Razaqzada, an analyst at Forex.com, said the mood had clearly changed. “The euphoria has died and prices have consolidated with lower lows and lower highs,” he said. “A lot of people have lost interest.”
Reporting by Tom Wilson and Tommy Wilkes; Editing by Saikat Chatterjee and Ed Osmond.
