Bitcoin tumbles after all-time highs amid falling liquidity

Bitcoin plunged on Monday after surging to its latest record high a day earlier as a sell-off in global equities curbed risk appetite, with traders citing the unwinding of highly leveraged long positions in the cryptocurrency.

The most popular cryptocurrency sank by 10.59 percent to around $51,291 as of 2:32 pm GMT, setting it on course for its worst day in a month.

Bitcoin rallied on Sunday to a peak of $58,354, with its latest bout of weekend price moves taking its gains so far this year to almost 100 percent, according to Reuters. Its market capitalisation grew to $1 trillion on Friday.

 “Market liquidity is currently much lower for bitcoin than in gold or the S&P 500, which implies that even small flows can have a large price impact. Bitcoin’s falling market liquidity – how much is available for trades – makes it prone to wild price swings,” JP Morgan’s Nikolaos Panigirtzoglou wrote in a note on Friday, according to Bloomberg.

While bitcoin has rallied by over 300 percent since mid-October, the number of coins held in exchange addresses has declined by 6.6 percent to 2.38 million, according to Glassnode data.

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