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Cryptocurrency crash-style plunge, excessive leverage or the main reason



The popularity of Coinbase’s listing has not subsided, but the cryptocurrency market ushered in a sudden plunge over the weekend. Respondents believe that excessive market leverage is the main reason for the volatility in the cryptocurrency market. In addition, the uncertainty of regulatory policies in various countries also brings risks to the encryption market.

At around 11:30 on April 18, Beijing time, the price of Bitcoin, which was hovering around US$60,000, suddenly turned down, falling to around US$52,000 at one point, an intraday drop of more than 15%. As of press time at 20:00, the price of Bitcoin rebounded and then fell back to around $53,000. Ethereum fell from around $2,400 to around $2,000, down more than 10% in the past 24 hours.

Last week, the cryptocurrency market as a whole moved sharply higher following the listing of Coinbase. On April 14, the price of Bitcoin hit a record high of $65,747. Ethereum also rushed above $2,500 during the same period, setting a new record.

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Why did the price of the cryptocurrency market, which just hit a record high, suffer a sharp drop? Respondents believe that the current market leverage is too high as the main reason.

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An analyst at the encrypted financial service organization PayPal Financial, who did not want to be named, told reporters that the inter-agency lending rate data of encrypted currencies compiled by the agency showed that since the end of 2020, as the price of Bitcoin has continued to hit new highs, the lending rate has also increased. It has risen rapidly, and in February this year it was close to the level when Bitcoin plummeted in March 2020, indicating that market leverage is at a high level.

Quotes | The global cryptocurrency market value has shrunk by about 82.3 billion yuan: According to AICoin data, the current global cryptocurrency market value is 1,520.147 billion yuan. Compared with the previous data, the overall market value has shrunk by 82.317 billion yuan, a drop of about 5.14%. Among them, Bitcoin ranked first, with a market value of 755.1 billion yuan. Compared with the previous data, the market value dropped by 15.7 billion yuan, a decrease of about 2.04%, and its proportion rose to 49.67%. The second place is Ethereum, The market value is 220 billion yuan, a decrease of 600 million yuan compared with the previous data, accounting for 13.15%; the third place is Ripple, with a market value of 90.3 billion yuan, a decrease of 7.5 billion yuan compared with the previous data Renminbi, accounting for 5.94%. [2018/8/20]

"On April 13, the basis in the market was as high as 50%, and the funding rate was as high as 150%. Once the price of Bitcoin falls, it will easily lead to continuous liquidation and plummeting." The analyst said.

Gu Yanxi, founder of Liyan Consulting Company, holds a similar view. He told reporters that the current bitcoin price is mainly determined by derivatives, and once the derivatives fluctuate, it will lead to more substantial fluctuations in the underlying bitcoin price. Therefore, the recent rise and fall of Bitcoin is very fast, which is the result of leverage operation.

Market news that Coinbase insiders sold a large number of stocks also triggered market sentiment fluctuations. According to statistics from the American data analysis website GuruFocus, after the listing of Coinbase, its insiders sold a total of 12.965 million shares. Based on Coinbase’s closing price of $344.38 per share on Friday, that’s worth more than $4.6 billion.

Among them, Coinbase CEO Brian Armstrong sold nearly 750,000 shares, totaling approximately $292 million. Coinbase Chief Financial Officer Alessia Haas sold 255,600 shares for $388.73, totaling approximately $99.32 million.

In this regard, Wan Hui, the founding partner of Original Venture Capital, commented on her personal Weibo that "cash out" must happen, because Coinbase is a direct listing, and only when existing shareholders sell can there be initial supply, otherwise There is no initial liquidity, and there is no way to make a market.

The plunge in the price of Bitcoin also made it to the Weibo hot search-zce list that day, and investors once again felt the excitement of the cryptocurrency market. According to the statistics of Bitcoin Home as of 20:00 on the 18th, nearly 472,000 people liquidated their positions in the previous 24 hours, and the liquidation amount exceeded US$6.2 billion. Among them, the largest liquidation order occurred on Huobi-BTC, worth 46.94 million US dollars.

Currently, cryptocurrencies still face regulatory uncertainty. Turkey’s central bank decided last week to ban the use of crypto assets in payments. The central bank stated that encrypted assets are neither subject to any regulatory and supervisory mechanism nor supervised by a central supervisory authority, their market value may fluctuate excessively, and they may be used for illegal activities.

Federal Reserve Chairman Jerome Powell said last Wednesday that cryptocurrencies are a speculative tool. Previously, India proposed banning cryptocurrencies and imposing fines on those who trade or hold assets.

Ma Tianyuan, a partner of Wuwei Investment, an encrypted asset angel fund, told reporters that strengthening supervision will help squeeze out speculation in the cryptocurrency market in the short term, and it will also benefit the legal and compliant development of cryptocurrencies in the long run.

Author: Tang Cuiling


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