- Bitcoin fell again on Monday after a weekend crypto sell-off wiped more than $400 billion from the digital asset market.
- The world's largest cryptocurrency was trading below $50,000 on Monday after surpassing $57,000 four days ago.
- Analysts said the cryptocurrency is likely to remain volatile as policymakers navigate the next phase of the pandemic.
Bitcoin fell on Monday after a dramatic weekend crash in the cryptocurrency market wiped out more than $400 billion.
The world's largest cryptocurrency was down 3.7% to $47,585 on Coinbase exchange as of 5:35 a.m. ET.
Bitcoin crashed from over $57,000 on Friday to as low as $42,000 on Saturday, but then rebounded and spent much of Sunday trading just below $50,000.
As of Monday, the token was roughly 30% below its November high of nearly $69,000, highlighting the digital asset's volatility.
Ether, the second-largest token, fell 6.4% to $3,951 on Coinbase on Monday. Ether also crashed on Saturday, dropping to as low as $3,570, before recovering somewhat.
The weekend sell-off wiped more than $400 billion from the global crypto market, causing the total market capitalization of all tokens to fall to less than $2.2 trillion from more than $2.6 trillion on Monday, according to CoinMarketCap.
The cryptocurrency market began to fall on Friday along with other risk assets such as tech and meme stocks.
A confluence of concerns, including a new Omicron variant of the coronavirus, the growing likelihood that the Federal Reserve will tighten monetary policy, and conflicting signals from the U.S. economy, are making investors nervous.
Analysts say the cryptocurrency crash was exacerbated by the structure of the market, where traders frequently use derivatives – contracts to bet on the direction of an asset without physically owning it – and debt.
As prices began to fall on Friday, many exchanges began “liquidating” traders' positions to ensure they had enough capital to cover their losses, increasing downward pressure on the market.
More than $2 billion in long positions were liquidated across global crypto markets on Friday, with about $850 million of that coming from Bitcoin futures, according to Sean Farrell, head of digital asset strategy at Fundstrat.
read more: Prominent investor Louis Navellier is warning that there are growing signs that Bitcoin's “double top” could wipe out more than a year of gains.
Smaller tokens such as Solana, Binance Coin and Cardano also fell on Monday after dropping over the weekend.
But Farrell said there is reason to believe that Bitcoin will stabilize near current levels before moving higher, given that traders are likely attracted by the low price.
Despite the weekend sell-off, cryptocurrency prices have risen sharply so far this year, with Bitcoin up about 62% so far this year and Ethereum up more than 430%.
But analysts expect the coming months to be eventful for cryptocurrencies as economic policymakers try to navigate the next phase of the pandemic.
“Cryptocurrency coins and tokens are rising in value at a time when money is super cheap,” said Susanna Streeter, senior market analyst at brokerage Hargreaves Lansdown.
“Conditions are likely to remain highly volatile as speculation rages about when central banks will begin to further tighten their massive bond-buying programs and raise interest rates,” he added.
