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The Bitcoin price falls after the Wall Street sale




Bitcoin and other cryptocurrencies fell sharply on Saturday, another sign that investors withdrew from more risky games after this week’s stock market sale.

Bitcoin, the largest cryptocurrency in terms of market value, plunged more than 20% to $ 42,000 at midnight Eastern Time on Saturday before returning, according to data from CoinDesk. It traded at $ 49,000 Saturday night, down around 9% in 24 hours.

The decline was widespread throughout the crypto universe. Other widely traded cryptocurrencies, including Solana, Dogecoin and Shiba Inu coins, lost more than one-fifth of their value.

Ether, the second largest cryptocurrency, also fell by more than 15%, but had only a decline of 4% on Saturday night.

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Bitcoin and other cryptocurrencies are notoriously volatile and often plunge for mysterious reasons. Stock market turmoil over the new Omicron variant of Covid-19 and the Federal Reserve’s response to inflation may have played a role.

Another possible factor that accelerated bitcoin sales was the liquidation of heavily leveraged crypto derivatives, said Noelle Acheson, head of market insight at the cryptocurrency broker Genesis Global Trading. She pointed to a large sales order that may have triggered margin calls and liquidations for investors.

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Leveraged trading of cryptocurrency derivatives has become a major business for exchanges such as Binance, the world’s largest. Traders use futures contracts to bet on the rise or fall of a specific cryptocurrency. To make returns more attractive, they are allowed to make oversize games with little money. When the price of cryptocurrencies falls sharply, margin calls are forcing investors to liquidate.

The price of bitcoin fluctuated later on Saturday after El Salvador’s President Nayib Bukele, whose country adopted bitcoin as its national currency in September, said in a Twitter post that the country had bought 150 coins for an average of $ 48,670 each. “El Salvador has just bought the dip!” he said. He later wrote that the country had “missed the damn bottom by 7 minutes”, followed by a laughing emoji.

This is not the first time El Salvador has entered the market after a large fall in prices. The interventions have turned the poor little nation into an informal central bank that supports the digital currency, in the same way that mainstream central banks intervene in foreign exchange markets to keep currencies stable.

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Cryptocurrencies move much more than stocks or government-issued currencies. The week was a roller coaster ride for the stock market, with investors uncertain about the course of the pandemic and inflation. The Omicron variant has triggered new restrictions around the world, just as travel began to return. Researchers are trying to determine how effective current vaccines will be against Omicron.

Fears of a new economic downturn mixed with increased concerns from the Federal Reserve over inflation. Earlier this week, Chairman Jerome Powell said the central bank was prepared to withdraw its easy money policy faster than previously expected, and opened the door to raise interest rates in the first half of next year.

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Higher prices make it less attractive to hold speculative assets such as bitcoin. When the Federal Reserve raised interest rates in 2017 and 2018, bitcoin prices fell dramatically, referred to among crypto lovers as a bitcoin winter. The coin took off again during the pandemic. Bitcoin reached an all-time high on November 9 at $ 67,802.

Caitlin Ostroff contributed to this article.

Write to Patricia Kowsmann at patricia.kowsmann@wsj.com



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