Bitcoin Drops 5%, Slipping Below $50K on Leverage Washouts

Bitcoin was the big loser in cryptocurrency markets on Wednesday, down 5% on the day as investors weighed concerns about the COVID-19 omicron variant.

The world’s largest cryptocurrency was trading above $51,000 on Tuesday and began to drop below the $50,000 mark at around 10:30 a.m. coordinated universal time (UTC). As of press time, bitcoin (BTC) was changing hands around $49,645.

Ether (ETH), the second largest cryptocurrency by market capitalization, was down 3% in the last 24 hours.

European stock markets wavered after witnessing a sharp rise on Tuesday as investors grew more cautiously optimistic after studies showed vaccines provide partial shield against the omicron variant.

Laurent Kssis, a crypto exchange-traded fund (ETF) expert and director of CEC Capital, a crypto trading advisory firm, said that both bitcoin and ether remain vulnerable to price pullbacks, fueled by leverage washouts. According to the data site Coinglass, some $187 million of crypto trading positions were liquidated over the past 24 hours.

“This is skewed to long liquidations, which will inevitably put downward pressure on BTC,” said Kssis.

Glassnode data shows that support failed to hold and triggered a full wave of liquidations as the lower price was hit each time:

Looking forward over a longer-term horizon, bitcoin fundamentals remain “extremely strong,” and adoption and development trends are “undeniably bullish,” said Jason Deane, analyst at Quantum Economics.

He attributes the recent lack of market momentum to sentiment and technical trading more than anything else. “It may well stay that way until enough momentum is achieved in either direction,” said Deane.

Over the last two weeks, bitcoin short momentum volume has increased two times over that of longs, according to Stack Funds’ weekly report.

“Added pressures such as regulatory scrutiny, profit-takings and weaker accumulation trend have all played a part in this,” wrote Lennard Neo, head of research at Stack Funds.

Ecoinmetrics data shows that similar drawdowns in magnitude and duration were seen earlier this year that resulted in 20%-40% declines, and after each time, the market recovered and extended to new highs.

Other tokens such as Polygon’s MATIC token is up 6% in the last 24 hours, Chainlink (LINK) by 9.6% and Uniswap (UNI) by 2.5%, according to data from Messari.