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The omicron variant of the coronavirus has also led to risk aversion over concerns about what it might mean for global economic reopening. Image Credit: Bloomberg

New York: Bitcoin dropped 9.29 per cent to $48,752.15 at 02:01AM UAE time on Sunday, losing $4,991.54 from its previous close.

Bitcoin, the world's biggest and best-known cryptocurrency, is down 29.3 per cent from the year's high of $69,000 on November 10. Ether, the coin linked to the ethereum blockchain network, dropped 3.61 per cent to $4,070.52 on Saturday, losing $152.28 from its previous close.

The swings in cryptocurrencies come amid a volatile period for financial markets. Spiking inflation is forcing central banks to tighten monetary policy, threatening to reduce the liquidity tailwind that lifted a wide range of assets.

The omicron variant of the coronavirus has also led to risk aversion over concerns about what it might mean for global economic reopening.

Global stocks are down more than 4 per cent from a record in November, while haven assets like Treasuries have rallied.

Leveraged positions

Some leveraged buyers of Bitcoin were flushed out in Saturday’s crash, according to Vijay Ayyar, head of Asia Pacific with crypto exchange Luno in Singapore.

“Markets have also been jittery with all the uncertainty around omicron, with cases now appearing in many countries,” he said. “It’s hard to say what that means for economies and markets and hence the uncertainty.”

About $2.4 billion of crypto exposure, both long and short, was liquidated on Saturday, the most since September 7, according to data from Coinglass.com.

Bitcoin, famed for its volatility, has shed about $21,000 since hitting a record on November 10.

$21,000


drop in Bitcoin value since hitting a record on November 10

But it’s still up more than 60 per cent this year, a return that exceeds many other assets - and El Salvador’s President Nayib Bukele said the country had again bought the dip, adding 150 coins. The nation this year adopted Bitcoin as legal tender.

“As usual, since crypto traders deploy leverage it results in cascading sell orders and liquidations,” said Antoni Trenchev, co-founder of crypto lender Nexo. “We should find support around $40,000 to $42,000 and then rebound in line for an end-year rally. If that does not hold, we might revisit the July lows of $30,000 to $35,000.”