Bitcoin price has been showing weakness in recent days. But the sell-off accelerated on Monday as the OG cryptocurrency slipped from $7,100 to $6,800 within. Following this brutal fall, more than $40 million in long positions were liquidated on BitMEX. However, altcoins have endured an even worse clobbering in this market bloodletting.
Bitcoin Drops Below $7,000
At press time, bitcoin has dropped by 2.56% in the last 24 hours to trade at $6,934.81. This drop marks the lowest level this month. The last time bitcoin was trading below $7K was on November 25 when it unexpectedly dropped to $6,525.
As aforementioned, this dip was accompanied by massive liquidations on BitMEX. According to data from Datamish, $43.5 million contracts were liquidated over the last 24 hours. More than 2.5 million in short positions were liquidated on BitMex over the same period. As is evident, this is a smaller amount compared to the longs liquidated, indicating that most traders on the exchange were expecting bitcoin to surge prior to the decline below $7,000.
What Prompted The Slump?
It’s not immediately clear why bitcoin and the rest of the cryptocurrencies crashed in minutes but there are a few theories that might offer some insights.
The most popular theory is that the drop was a reaction to the report from Chainalysis which suggested that Chinese Ponzi scheme PlusToken is alive and well, subsequently causing markets to panic. The report revealed that the culprits of this Ponzi are dumping the stolen tokens mostly on the Huobi exchange thus contributing to the selling pressure.
Further, Chainalysis revealed that around 20,000 BTC and 790,000 ETH is still controlled by the Ponzi scheme perpetrators. This has stirred fears of further bloodshed caused by the PlusToken scammers dumping more.
Another less popular interpretation is the positive developments coming from the US-China trade war. Although unlikely, it’s a possibility that the easing of the US-China trade war and the continued losses in the markets are somewhat connected. On December 13, President Donald Trump announced that the United States had agreed to a partial deal with China, confirming that the US will not be imposing tariffs on $120 billion of Chinese goods.
As the trade war heated up in May this year, many experts in the industry claimed that investors were buying bitcoin to hedge against economic uncertainties. Now, with the trade war seemingly easing, bitcoin is no longer appealing. Large investors are moving out of safe haven assets like bitcoin and moving into risky assets, hence the continued drop.
Altcoins Take A Bigger Hit
Despite the sudden slide, bitcoin’s dominance climbed from 66.44% to 67.2%, indicating that altcoins took a deeper dive. Ethereum has slumped by 6.17% to $133 according to CoinMarketCap. Going forward, a further slide below $130 could spark a fresh wave of selling pressure towards 2018 crypto winter levels below $120.
Ripple’s XRP has lost 7.02% to trade at a two-year low of $0.198668. This level was last seen in 2017 despite Ripple forging multiple collaborations this year. Litecoin, EOS and Binance Coin are also down by 7.72%, 7.38% and 8.34% respectively. Tezos (XTZ) is the only top 10 token in the green with 0.18% gains.
Overall, the total crypto market cap has tumbled by nearly $10 billion in the past 12 hours after dropping precipitously from $195 billion to the current $187 billion.