Bitcoin flash crash short-lived as cryptocurrencies stabilise

Bitcoin’s selloff eased on 8 September, offering some respite to holders of the volatile cryptocurrency after a flash crash a day earlier erased billions of dollars in its value.

The largest cryptocurrency by market value edged 1% lower from its 5pm ET level on Tuesday to trade at about $46,287, according to CoinDesk. It briefly dropped 17% over the course of a few minutes on 7 September, and ended the day down about 10%.

Other digital assets including ether have also lost steam.

There hasn’t been a single catalyst to precipitate the recent selloff. A 70% run-up in bitcoin’s value since late July — combined with the euphoria tied to El Salvador adopting bitcoin as a national currency starting 7 September — could have prompted traders to book profits, analysts say.

Investors have also been stepping up bets on other cryptocurrencies in recent months, giving a boost to the Ethereum and Cardano blockchains and driving up prices on non-fungible tokens.

Bitcoin and rival digital assets are also notoriously jumpy, with prices frequently swinging wildly on rumors, tweets by influencers or a shift in sentiment among groups of traders banding together on social media to make speculative bets.

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In the latest bout of volatility, bitcoin has lost almost $93bn in market value since Sunday. Other cryptocurrencies also took a hit: ether lost $61bn, and Cardano’s ada shed $13bn.

“Profit-taking was very much on the cards,” said Naeem Aslam, London-based chief market analyst at brokerage AvaTrade. “In our view, that is a very healthy pullback.”

A host of factors could be dampening optimism and could stump a further rally in bitcoin. Coinbase said on 8 September that the Securities and Exchange Commission had threatened to sue the cryptocurrency exchange if it launches a program that lets users earn interest by lending crypto assets.

Coinbase shares fell 3.3% in premarket trading.

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Glitches in the rollout of El Salvador’s unprecedented adoption of bitcoin as a national currency could also be curtailing expectations among some traders. The Central American country’s President Nayib Bukele said early Wednesday that the government’s bitcoin e-wallet would be taken offline between 1am and 6am local time to make improvements and address issues reported by users.

The friction between heightened adoption of cryptocurrencies world-wide on one hand, and regulators paying more attention to the market on the other, could lend to more volatility in digital assets, analysts say.

Write to Caitlin Ostroff at [email protected]

This article was published by Dow Jones Newswires