The euphoria in the cryptocurrency market was quelled on Jan.11 as the majority of altcoins saw their prices decline by more than 20% as Bitcoin price sold off sharply.
After falling below the $40,000 support level on Jan. 10, selling pressure for Bitcoin (BTC) increased overnight and pushed the price of the top cryptocurrency as low as $30,229 before a soft support level was reached.
The rapid decline in price led to more than $2.7 billion worth of futures contracts being liquidated and the long candles on the Bitcoin price chart show that the cascade of liquidations occurred quickly as the price dropped from $41,000 to $32,229.
Daily cryptocurrency market performance. Source: Coin360
Dallas Mavericks owner Mark Cuban used the market downturn as no opportunity to point out that the cryptocurrency market is identical to the internet stock bubble from the 1990s.
Cuban said that “Watching the cryptos trade, it’s exaclty like the internet stock bubble,” but he added that Bitcoin, Ether, and “a few others” will likely follow the path of Amazon and eBay and continue to see their valuations rise.
Those with a little more skin in the game, such as Celsius CEO Alex Mashinsky, view the recent drop as a healthy price correction and Mashinsky hinted that there is a possibility of BTC dropping as low as $16,000 before resuming its upward trek.
Traditional markets feel the pressure
The traditional financial sector also found itself under pressure on Monday as the political situation in the United States continues to generate tension and uncertainty about the future of the country and the economy.
The S&P 500, Dow, and the NASDAQ all finished the day in the red, down 0.66%, 0.29%, and 1.55% respectively as big-tech and the FAANG stocks hit their lowest levels since Nov. 26.
Analysts say the market was due for a correction
Nearly every time BTC price falls by thousands of dollars, bears, doomers and nocoiners emerge from the netherscape to issue calls for the death of Bitcoin.
Considering that Bitcoin price rose from $17,586 on Dec. 11 to $41,950 in less than a month, David Lifchitz, CIO at ExoAlpha views this pullback as a “healthy correction by smart institutions who bought BTC from $20,000 on the way up to $30,000.”
Lifchitz told Cointelegraph:
“One worrying sign was not that Bitcoin price was rising, but its velocity, i.e. the speed at which it did move. From mid-December to end of December 2020, the median amplitude of the daily moves in Bitcoin doubled to 8.1%, then it almost doubled again from Jan.1st, 2021 to Jan.10th to 15.3%. The larger the amplitude, the more exchanges took place through the day between buyers and sellers. This is a healthy correction though to purge the excessive growth of the last 10 days, allowing Bitcoin to build a new base toward $50k and above.”
Hints at the driving force behind recent price movements could also be found through analyzing patterns emerging on social media.
Bitcoin price vs. daily sentiment. Source: TheTIE
According to Joshua Frank, CEO and founder of TheTie, an alternative data social analytics platform, the lack of Bitcoin Twitter mentions in December 2020 indicates that a small number of large investors were driving the price gains.
In private comments to Cointelegraph Frank said:
“On January third, both Bitcoin and crypto 24-hour tweet volume hit an all-time high. Retail interest has continued through the second week of January and monthly average Twitter conversations around Bitcoin are now at an all-time high in January. Unsurprisingly, this surge in Twitter activity has corresponded with a local top on Bitcoin.” BTC/USD daily chart. Source: Coin360
Ether (ETH) price was also hard hit by today’s downturn, dropping as low as $914 before finding support. At the time of writing, ETH is down 16.33% and trading at $1,033. Out of the top 50 cryptocurrency projects, the only token currently trading in the green on the day is Neo (NEO), up 1.5% and trading at $22.52.
The overall cryptocurrency market cap now stands at $847 billion and Bitcoin’s dominance rate is 68.9%.