A sharp and broad-based sell-off has hit the cryptocurrency market, piercing a recent bull run powered by corporate and retail interest alike.
The global cryptocurrency market has tanked 14% in the last 24 hours, according to CoinMarketCap.com. The slump was led by bitcoin, which accounts for 60% of the cryptocurrency market by value. Bitcoin (BTC-USD) was down 12.5% to $48,876.16 by 8.15am Tuesday in London.
Most major cryptocurrencies were down on the day. Ethereum (ETH-USD), the world’s second biggest crypto, was down 14.8% to $1,600.96. Doge Coin (DOGE-USD), a meme crypto that gained popularity in recent weeks thanks to Elon Musk, was down 10% to $0.0508.
The sell-off began on Monday, seemingly triggered by comments from US Treasury Secretary Janet Yellen. Yellen said bitcoin was “inefficient” as a means of payment and highly speculative.
Analysts also pointed to tweet from Elon Musk over the weekend saying bitcoin and ethereum prices “seem high.”
“Tesla and bitcoin are increasingly tied together and the latter had a crazy day, trading down -16.53% at one point before closing -4.21% in its worst daily performance this month,” said Jim Reid, a senior strategist at Deutsche Bank. “It’s not clear if the moves were prompted by a delayed reaction to an Elon Musk tweet on Saturday in which he said that the bitcoin did ‘seem high’.”
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The slump follows a surge over the last few months that has propelled the market to new highs. Bitcoin has risen over 400% since the start of October and recently reached a new all-time record above $58,000.
The cryptocurrency was propelled higher by increased interest from both retail investors and institutions. Musk’s Tesla (TSLA) said earlier this month it had invested $1.5bn in bitcoin, which spiked the asset’s price.
“For bitcoin, this is certainly not the first major pullback during this cycle, nor is it even the most severe,” said Mati Greenspan, founder of Quantum Economics. “We’re up about 80% year-to-date, and even a normal bull market retracement from the peak right now would take us all the way back to $40,000 per coin.
“With the powerful narrative that bitcoin is good for hedge funds and multinational corporate balance sheets proliferating through the mainstream psyche, it certainly does seem more likely that this bull has more room to run, even if we are in for some volatility in the short-term.”
Naeem Aslam, chief market analyst at Avatrade, said: “In terms of technical analysis, the Bitcoin price is still trading above the 50, 100, and 200-day simple moving averages on the daily timeframe.
“As long as this remains in place, there is little to worry about the bullish trend.”