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- Bitcoin slipped to 21% until Sunday and Monday, its biggest two-day decline since March, under pressure from investor risk aversion that also undermined equities while the dollar rose.
- The possibility of a second indictment for Donald Trump, led by Democrats, encouraged the safe haven in the dollar, which rose to two-week highs.
- Bitcoin has risen another 89% in the past month.
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Cryptocurrencies tumbled Monday, sweeping nearly $ 140 billion in total market capitalization as traders made profits on the spectacular march so far this month, amid a stronger dollar and growing political uncertainty.
Investors will closely monitor the possible accusation of President Donald Trump and an increase in cases of COVID-19 in Asia.
Bitcoin fell to 21% on Sunday and Monday, its biggest two-day decline since March, although the cryptocurrency is still about 89% higher on a next month basis. Ethereum decreased by 12%. Smaller coins XRP and Litecoin increase by about 18% each.
The decline in cryptocurrencies on Monday wiped out nearly $ 140 billion from the entire market. Last week, the total value of the cryptocurrency market hit more than $ 1 trillion for the first time.
Bitcoin hit a record high of more than $ 41,000 last week, fueled by a combination of a weaker dollar, economic optimism and a wave of strong sentiment against cryptocurrencies, as large investors and investment banks reach their potential for big profits designated this year.
Read more: The CIO of a $ 500 million crypto asset manager breaks out 5 ways to value bitcoin and decide if he will own it after the digital asset first breached $ 40,000
Political uncertainty has increased, and investors’ risk appetite for assets such as stocks and commodities has increased, as Democrats were willing to accuse Trump for a second time after his alleged incitement to a right-wing mob at the Capitol last week building collapsed.
Speaking to colleagues on Sunday, House Speaker Nancy Pelosi said: “The horrors of the ongoing assault on our democracy committed by this president are intensifying and so is the immediate need for action.”
“The stronger dollar and higher bond yields also caused a dip in Bitcoin and gold prices this morning,” Rabobank strategists said in a note.
Bitcoin and other cryptocurrencies – like many commodities – tend to do the opposite of what the dollar does.
The correlation between Bitcoin and the dollar index is at -0.95, which means that the two are more likely to move in reverse to each other than not. Correlation is measured between 1.0 and -1.0, with the former positive correlation – two assets tend to move in perfect relationship with each other – and the latter, vice versa.
The dollar last rose 0.4% against a basket of major currencies, trading the strongest in nearly two weeks, with a low of 33 months last week.
Ethereum, the second largest cryptocurrency by market capitalization after Bitcoin, fell 11.4% on the Bitfinex exchange, according to Bloomberg data, where the trading volume was the largest. The price held about $ 1,128, and it is still out of sight of the three-year highs of about $ 1350 last week.
However, analysts said the decline is likely to be temporary given the growing number of buyers and owners of cryptocurrencies.
“Some of the anarchy foam supporting Bitcoin after anti-government forms stormed Capitol Hill is back a bit. But the reason for holding long coins on the impetus of new-era technology and everything related to blockchain technology , has not changed much, “said Axi. chief market strategist Stephen Innes said.
Read more: ‘This feels a lot like 1999’: a former Wall Street strategist explains why he approaches the markets with a ‘tactically bullish’ strategy – and three pieces of advice on how to play a market that’s for ‘ a correction has been made.