Crypto Market: What Happened This Week?

Bitcoin's Performance and Rise of New Cryptocurrencies

Juan Díaz- Senior Correspondent, Spain

06:00 AM, December 9, 2021

Mark Zuckerberg's big announcement which took place a month ago has caused such enormous euphoria within the cryptocurrency space that crypto assets which have a relationship to the Metaverse have been in a state of unstoppable ascendancy. Moreover, we have been able to see how some cryptos that happen to be related to the metaverse space such as Decentraland (MANA), The Sandbox (SAND) or Enjin Coin (ENJ) have grown between 100% and 400% of their value, these being quite exorbitant returns compared to the performance of Bitcoin in the last month. However, after some considerably quiet weeks, the terrible news of the new COVID Omicron variant sent shivers through the financial markets.

Bitcoin closed the stock market week down more than 5% already, and the move accelerated overnight Friday into Saturday. The sell-off was most pronounced around midnight Eastern time, where bitcoin plunged from $52,000 to a low of $42,000, before rebounding to current levels ranging from around $46,000 to $50,000.

One of the causes of such a large drop has been the accumulation of long leveraged positions within the main crypto asset, Bitcoin. Thus liquidating most of these overleveraged positions, and returning to previous values of $49,000 in less than 24 hours. These long positions and leveraged products have been in use since late September when bitcoin was at a major accumulation point between $39,000 and $45,000. The radical move closed 20% of the futures contracts that were open prior to the drop. Anyways, some are using this fall as an opportunity to “buy the dip.” El Salvador President Nayib Bukele, whose country holds bitcoin on its balance sheet and has purchased coins during previous dips, announced another purchase of 150 BTC for around $48,700 each. In addition, Bitcoin and the other cryptocurrencies continue to remain above the lows reached in September. The more relevant question right now is whether the movement which has taken place in the past few days is a healthy and typical pullback or whether it could turn into a more lasting general sell-off. Although many people assume that the top of this bullish cycle has not yet arrived and that it is possible to reach the $100,000 level in the next few months. On-chain analysis clearly shows how Bitcoin wallets and whales have started to sell and transfer their assets from cold wallets to exchanges. Based on the past, we have seen how these large whales tend to accumulate in bear markets and periods of indecision and distribute or sell in periods of euphoria and record highs, as seen in the peak that Bitcoin created on November 10, 2021. In conclusion, the last few months have been marked by the euphoria caused by Zuckerberg's announcement regarding the metaverse world. And finally, we have seen Bitcoin declining as much as 40% from its all time high reached in November which was marked by a strong recovery and surge to new highs.