fell below $45,000 on Tuesday, hitting a nearly four-month high of around $52,000, a few hours later
Started as legal tender in El Salvador, the first country to do so.
Other cryptocurrencies such as Ethereum, Binance Coin and Cardano also fell between 13% and 18% on Tuesday, while meme coins such as Tesla founder Elon Musk-backed Dogecoin and Shiba Inu—a cryptocurrency named after the dog-themed meme and rival Dogecoin—launched for one time fell by 33% and 70%, respectively.
ETtechExperts blame liquidity crunch in India for ‘flash crash’ crypto Markets, which can give disproportionate power to large holders, and the fact that crypto markets are sentiment-driven and lack proper regulation. One industry expert said that meme coins are particularly volatile and may be driven by a “buy rumour, sell news” philosophy.
Experts said that algorithmic trading programs that sell or buy at pre-determined price levels can add to the pressure even once activated. Unlike traditional stock markets, he said, crypto markets lack circuit breakers that are triggered when an index or stock fluctuates beyond a set threshold. He added that wild swings are a standard feature of cryptocurrency markets.
‘Pullbacks are healthy’
The loss of bitcoin also triggered selloffs on Coinbase, Kraken and Gemini, the world’s largest crypto exchanges.
In India, however, many traders ended the decline.
indigenous crypto exchange wazirxIts chief executive and cofounder Nischal Shetty said daily trading volume increased to $280 million from the normal $100-150 million.
Experts and traders said they were not surprised by the decline of bitcoin.
“Crypto markets, although growing, are not as liquid as traditional financial markets. If there is more liquidity, it [flash crash] It is less likely to happen,” Shetty said, adding that there is no data to explain why Flash crashes.
According to a full time bitcoin trader from India, the sustained peak selloff is part of a correction during the bull market.
“Such loopholes are healthy for the continued market. If something continues to rise, it will not create a demand-supply zone, and eventually the fall will be catastrophic,” the trader, who did not wish to be named, said.
Vikram Rangala, Chief Operating Officer and Chief Ohana Officer crypto exchange Zebpay called this a “general price correction after a rally”. Ohana is a word that refers to family in Hawaii.
It’s early days for retail adoption of cryptocurrencies investors, so flash crashes are not uncommon in markets with limited users, he said.
“In thin markets, there may be fewer players to buy and sell at those intermediate prices, so you see bigger moves,” Rangala said.
Retail investors told ET that they have made peace with the volatile nature of crypto.
“I actually made decent returns on some of the investments I made in high-risk coins. Now I am looking forward to the big drop so that I can reinvest that money,” said Sanil Mahajan, head of supply chain at a large IT company “Now the unpredictability of crypto is almost predictable. I started to realize this last week when some cryptocurrencies broke down to reach yearly highs. These are typical signs of a ‘pump and dump’ plan, and indicate that a major accident is on the way in a few days.”
Mrityunjay Lala, a 20-year-old crypto investor from Pune, said that anything that rallies so quickly will automatically recover in due course.
“Bitcoin rose from $30,000 in July to $50,000 in September, so a crash was expected. And by now we all know that cryptocurrencies are more volatile than any other asset class,” Lala said.
in May,
Dogecoin hits an all-time high of $0.68 in anticipation of Musk’s appearance On the Saturday Night Live show, as investors expected it would cross the $1 threshold, but its value fell by about 35% within 24 hours of the broadcast.