Bitcoin investors have liquidated $2.56 billion worth of assets in recent days, as cryptocurrencies fell following a sell-off in other risky assets, including stocks and precious metals, according to analytics firm CoinGlass, UNN reports with reference to Reuters.
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The collapses of both short and long positions in Bitcoin are significantly lower than the record $19 billion the market experienced after US President Donald Trump announced new tariffs on goods from China. However, analysts say the new wave of collapses demonstrates how sensitive the cryptocurrency market has become to a decline in risk appetite.
While Bitcoin is known for its volatility, cryptocurrencies have also come under pressure from new concerns about artificial intelligence trading and a sell-off in precious metals triggered by Trump's announcement that he is choosing Kevin Warsh as a candidate for Fed chairman.
"In the last few months, we've seen people probably take a step back, re-evaluating their risk assessment systems and methods of operating in this market," said Adam McCarthy, a senior research analyst at Kaiko, a company that provides data on digital markets.
Bitcoin fell to $104,782.88 between October 10 and 11, after reaching a new all-time high above $126,000 just days before.
It has yet to recover those peaks, and was last trading around $78,396, after falling more than 6% on Saturday. Low liquidity over the weekend also exacerbated the downward movement over the weekend, according to a Bitfinex research report published on Monday.
"The biggest risk to prices at these levels comes from external factors - whether it's a sharp rise in unemployment or a worsening situation in the AI market," said Jim Ferraioli, director of crypto research and strategy at the Charles Schwab Center for Financial Research.
Last week, markets faced a flood of news that heavily impacted investor sentiment, including Microsoft's disappointing financial results, which raised concerns about AI spending. On Wednesday, Microsoft reported revenue growth in its Azure cloud business that only slightly exceeded expectations, leading to a 10% drop in shares the next day.
Markets also expect Warsh to lead a move towards lower interest rates alongside a tightening of balance sheet policy, which is believed to lean towards a more hawkish policy.
The announcement triggered a sharp drop in gold and silver prices on Friday: silver had its worst day ever, and gold its sharpest daily drop since 1983.
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"Investors were looking for an excuse to relax, and they finally got a few," said David Morrison, senior market analyst at Trade Nation.