The crypto has rapidly plummeted in a flash crash, dragging down all the other big players with it, just a week after hitting an all-time high.
Bitcoin’s value crashed overnight, sending crypto traders into panic.
The cryptocurrency dropped by thousands of dollars in just a few minutes early on Wednesday night in what’s known as a flash crash.
It’s now trading at around US$58,000, down more than $6,000 from the levels it was trading earlier this week.
The drop has wiped hundreds of billions from global cryptocurrency markets.
It’s led to a drop in the prices of a number of other cryptocurrencies, including Ethereum, Binance Coin, Cardano, Solana and Ripple.
It comes a week after Bitcoin hit a new all-time high of close to $67,000.
What caused the drop in Bitcoin price?
The crash is partly driven by long-term holders selling at a high to take home profits, according to blockchain data. That’s typical following a price spike.
But it also coincided with financial company Direxion filing for a new bitcoin exchange traded fund (ETF) that would bet against the future price of the crypto.
It will be called the Direxion Bitcoin Strategy Bear ETF, according to its filing with America’s Securities and Exchange Commission.
The application comes just a week after the SEC allowed the first bitcoin futures ETF, the ProShares Bitcoin Strategy ETF, to begin trading.
The approval of that ETF helped send the price of bitcoin to its latest all-time high as analysts said the new ETF would help broaden investor exposure to cryptocurrencies and make the sector more mainstream.
Last night’s slump is expected to trigger a wave of new buyers tempted by the sudden dip in price.
Bitcoin and other cryptocurrency prices have rocketed this year. The combined crypto market is now said to be worth over $2.6 trillion.
Bitcoin alone has added almost 400 per cent to its value since this time last year. However, it has dropped sharply in the past 24 hours.
Earlier this year, analysts warned that the cryptocurrency remains concentrated among a small number of holders.
At the end of 2020, the biggest 10,000 bitcoin holders held around 27 per cent of the total 18.6 million coins in circulation.
This makes Bitcoin susceptible to “systemic risk”, researchers at the National Bureau of Economic Research wrote.
“Despite the significant attention that bitcoin has received over the last few years, the bitcoin ecosystem is still dominated by large and concentrated players, be it large miners, bitcoin holders or exchanges,” they said.
“This inherent concentration makes bitcoin susceptible to systemic risk and also implies that the majority of the gains from further adoption are likely to fall disproportionately to a small set of participants.”
This articleoriginally appeared in The Sun and was reproduced with permission.