Cryptocurrencies resume selloff as one-day recovery fizzles

A rebound has reversed as traders turned pessimistic again on cryptocurrencies

The biggest cryptocurrencies resumed their decline on Sunday, failing to reverse a selloff. Sascha Steinbach / EPA.

The biggest cryptocurrencies resumed their decline on Sunday, failing to reverse a selloff that began when bitcoin’s unprecedented rally fell short of breaking above $20,000.

A rebound on Saturday fizzled in the afternoon and traders turned pessimistic again, driving bitcoin down 13 per cent in the past 24 hours. The drop among the 10 largest digital coins, ranging as much as 17 per cent for iota, brings more end-of-year weakness to a market that just had its worst four-day tumble since 2015.

“The West is what’s causing this selloff,” said Mati Greenspan, senior market analyst at online broker eToro, pointing to increased trading in dollars and less in yen. The recent cryptocurrency rally was so steep that investors were prone to take money off the table going into the Christmas holiday season, he said.

The retrenchment is not typical for cryptos, which often snap back after a few losing sessions. The last time bitcoin dropped for five successive weekdays was September and, before that, July. While the market has been volatile for most of this year, the rapid run-up has made the recent selloff sting more for digital coin enthusiasts.

Traders have knocked about $160 billion in market value off the biggest cryptocurrencies in about three days, according to CoinMarketCap data. The tumble coincided with several warnings in the past week from financial authorities about elevated risk in holding digital coins.

“The crypto market went to astronomical highs, so it’s got to come back to reality,” Mr Greenspan said. “Something that goes up 150 per cent in less than a month is probably going to have double-digit retracement.”

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Bitcoin was at $13,367 as of 5 p.m. New York time on Sunday. That’s almost one-third off its record high of $19,511, based on prices compiled by Bloomberg. Ethereum, the second-biggest cryptocurrency by market value, dropped about 12 per cent in the past 24 hours, to $663.77, CoinMarketCap data show.

While “nascent blockchain-based cryptocurrencies are rapidly entering mainstream finance,” some of the second-generation digital coins have a better outlook than bitcoin, Bloomberg Intelligence analyst Mike McGlone wrote in comments published on Sunday. The whole group is akin to internet-based companies a few decades ago and exchange-traded funds more recently, he said.

“Bitcoin is the crypto benchmark, but not the best representation of the technology,” Mr McGlone wrote. Altcoins “should continue to gain on bitcoin, which has flaws and where futures can be shorted,” he said.

Bitcoin’s record high was reached on December 18, hours after CME Group debuted futures contracts, which some traders said would encourage short position-taking.