- Bitcoin fell by as much as 21% on Sunday and Monday, the biggest two-day drop since March. It was pressured by investors to avoid risks, which also weakened the stock market, while the U.S. dollar rose.
- The possibility of a second impeachment of Donald Trump under the leadership of the Democratic Party encouraged safe-haven funds in the U.S. dollar, which rose to a two-week high.
- In the past month, Bitcoin still rose by about 89%.
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Due to the strengthening of the U.S. dollar and increased political uncertainty, traders have profited from the spectacular rally so far this month. Cryptocurrencies plummeted on Monday, wiping out nearly $140 billion in total market value.
Investors will pay close attention to the possible impeachment of President Donald Trump and the surge in COVID-19 cases in Asia.
Bitcoin fell by as much as 21% on Sunday and Monday, the biggest two-day drop since March, although the cryptocurrency has risen by about 89% in the past month. Ethereum fell 12%. The smaller coins XRP and Litecoin each fell about 18%.
On Monday, the decline in cryptocurrencies wiped out nearly $140 billion in the entire market. Last week, the total value of the cryptocurrency market exceeded $1 trillion for the first time.
Last week, due to the combination of a weak U.S. dollar, economic optimism, and bullish sentiment on cryptocurrencies, Bitcoin reached a record high of over $41,000 as well-known investors and investment banks are touting its potential for huge gains this year .
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Political uncertainty is increasing, which has dampened investors’ risk appetite for assets such as stocks and commodities, as Democrats prepared to impeach Trump for the second time after inciting right-wing mobs to sweep the Capitol last week.
The Speaker of the House of Representatives, Nancy Pelosi, wrote to colleagues on Sunday, saying: “The current president’s fear of constant attacks on our democracy has increased, so urgent action is needed.
Rabobank’s strategists stated in the report: “The strength of the U.S. dollar and rising bond yields also triggered a sharp drop in the prices of Bitcoin and gold this morning.”
Like many commodities, Bitcoin and other cryptocurrencies tend to be the opposite of what the U.S. dollar does.
The correlation between the Bitcoin and U.S. dollar index is -0.95, which means that the two are more likely to move in opposite directions. Correlation measures are between 1.0 and -1.0. The former indicates a positive correlation-two assets tend to move in perfect tandem with each other-the latter is the opposite.
The U.S. dollar recently rose 0.4% against a basket of major currencies, reaching its highest level in nearly two weeks. It fell to a 33-month low last week.
According to Bloomberg data, Ethereum, by market capitalization, is the second largest cryptocurrency after Bitcoin. It fell 11.4% on the Bitfinex exchange, which has the largest trading volume. The price remained at around $1,128 and is still near last week’s three-year high of $1,350.
However, analysts said that given the increasing number of people buying and holding cryptocurrencies, the retreat may be temporary.
“After the anti-government type attacked Capitol Hill, some of the anarchy bubbles that supported Bitcoin gradually disappeared. However, the reasons for keeping gold coins in the new era of technological impulse and everything related to blockchain technology have not changed much. “Axi chief market strategist Stephen Innis said.
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