- Bitcoin slid as much as 21% over Sunday and Monday, its biggest two-day decline since March, under pressure from investor risk aversion that also undermined equity while the dollar increased.
- The prospect of a second impeachment for President Donald Trump prompted safe haven flows to the dollar, which rose to two-week highs.
- Bitcoin is still up about 89% over the past month.
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Cryptocurrencies fell on Monday, wiping out nearly $ 140 billion in total market cap, as traders took profits at the spectacular rally so far this month in light of a stronger dollar and growing political uncertainty.
Investors will be keeping a close eye on President Donald Trump’s possible impeachment and a surge in COVID-19 cases in Asia.
Bitcoin plummeted as much as 21% over Sunday and Monday, its biggest two-day decline since March, though the cryptocurrency is still up around 89% on a one-month drag basis. Ethereum fell 12%. The smaller XRP and Litecoin coins shed about 18% each.
The collapse in cryptocurrencies on Monday wiped nearly $ 140 billion off the entire market. Last week, the overall cryptocurrency market rose above $ 1 trillion for the first time.
Last week Bitcoin hit a record high of $ 41,000, swept by the combination of a weaker dollar, economic optimism, and a wave of bullish sentiment towards cryptocurrencies as big-name investors and investment banks touch on potential for huge gains this year .
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Political uncertainty has increased, beating investors’ risk appetite for assets such as stocks and commodities. House Democrats have said they are ready to impeach Trump again after he encouraged a right-wing crowd who attacked a Capitol building last week.
“The horror of the ongoing attack on our democracy perpetrated by this President is compounded as is the immediate need for action,” House Speaker Nancy Pelosi wrote to colleagues on Sunday.
Strategists at Rabobank said in a note that “the stronger dollar and higher bond yields also triggered a dive in Bitcoin and gold prices this morning.”
Bitcoin and other cryptocurrencies, like many commodities, tend to do the opposite of whatever the dollar does.
The correlation between Bitcoin and the dollar index was -0.95, meaning both are more likely to move inversely. Correlations are measured between 1.0 and -1.0, with the former indicating that the two assets tend to move together perfectly.
The dollar was up 0.4% against a basket of big currencies, trading at its strongest in nearly two weeks after plummeting to 33-month lows last week.
Ethereum, the second-largest cryptocurrency by market capitalization after Bitcoin, fell 11.4% on the Bitfinex exchange, where trading volume was the largest, according to Bloomberg data. The price held at around $ 1,128, within sight of last week’s three-year high of about $ 1,350.
However, analysts said the retreat is likely to be temporary, given the growing number of buyers and owners of cryptocurrencies.
“Some of the anarchy broth that backs Bitcoin after anti-government types invade Capitol Hill is receding. But the reason to wait long coins on the new-age technology impetus and all that connected to blockchain technology has changed a lot, “said Stephen Innes, chief market strategist at Axi.
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