Virtual currencies were roiled amid fears of contagion from the liquidity crisis at China Evergrande Group, the world’s most indebted developer. A global stock retreat abated somewhat in Asia on Tuesday, though Evergrande’s woes and the looming Federal Reserve meeting remain potential triggers of volatility.
“Bitcoin and Ether are getting swept up in the risk-off momentum that has been gaining since late last week,” said Adam Reynolds, chief executive for Asia-Pacific at Saxo Capital Markets. He expects “more liquidation to come".
About US$1.4 billion of cryptocurrency liquidations occurred in the past 24 hours, according to data from Bybt.com. These happen when leveraged positions are closed by exchanges for failing to meet margin requirements.
From a technical perspective based on Bitcoin’s price charts, the token has traced a hammer pattern right above the lower border of a so-called Ichimoku cloud. That suggests the next key support level to watch for is about US$39,900.
Katie Stockton, founder of Fairlead Strategies, flagged the same level as a potential support in a note, while adding Bitcoin is still in a long-term uptrend.
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Bitcoin is up more than 40% in 2021, while Ether has quadrupled and the wider Bloomberg Galaxy Crypto Index has more than doubled.
Cryptocurrencies remain controversial investments. Some see them as highly volatile and purely speculative with little intrinsic value, while others argue institutional adoption will grow, tempering volatility and supporting prices.
Photo: Bloomberg
