N Rotteveel/iStock Editorial via Getty Images
Bernstein analyst Gautam Chhugani wasn’t caught off guard by bitcoin’s (BTC-USD) abrupt, double-digit drop over the last couple sessions as the only weekend-traded market, citing a similar reaction during the March 2020 nosedive.
Bitcoin (BTC-USD) tumbled to as low as ~$50K on Monday as global equity markets recalibrated in response to mounting recession concerns and the unwinding of the yen carry trade. It was trading at around $60K-$65K just last week, underscoring the token’s exceptional price volatility.
“Bitcoin’s (BTC-USD) initial reaction as a ‘risk off’ asset is not surprising,” Chhugani wrote in a recent note to clients. “This has often been the pattern for Bitcoin markets (seen before in March 2020 flash crash too), particularly, as it is the only market trading over the weekend.”
Aligning with Bernstein’s assessment, Shubh Varma, CEO and co-founder of Hyblock Capital, called bitcoin’s (BTC-USD) plunge “a natural correlation drop.” The magnitude of the price swoon was driven in part by “substantial amounts of liquidity on the downside, with minimal liquidity on the upside. The imbalance typically triggers a liquidity cascade, leading to a sharp downward movement.”
In the meantime, bitcoin (BTC-USD) rebounded in Tuesday morning trading, jumping 5.5% to $54.8K, as major equity averages pared back some of Monday’s losses.
