Bitcoin and other cryptocurrencies were struck by heavy losses on Thursday morning as the hopes of reaching record highs were quickly diminished after months of impressive performances.
Bitcoin fell more than 15% from its high of $19,521 on Wednesday to a low of $16,391 on Thursday.
This was one of the biggest daily drops since the beginning of September for the digital asset when it fell 10% in the space of 24 hours.
The reason for the sharp drop is threefold, according to crypto exchange Coindesk. Excess leverage, technical pullback and other factors amplified sell-off.
The exchange said that the recent rally looked 'overstretched' and therefore the pullback was likely to happen as it usually does in previous bull markets.
Investors were hopeful that the valuation would surpass its previous record value of $20,000 seen in December 2017. Since mid-March, bitcoin had rocketed 263% from its lowest price of $5,165.
Ripple and ethereum also suffered heavy losses over the course of Wednesday and Thursday, falling 35% and 18.6%, respectively.
The crypto ETP market had been booming as a result of the price rallies prior to Thursday as 21Shares reached $150m assets under management while BTCE surpassed $160m on Wednesday.
On 18 November, BTCE saw record trading volume for a single day of over two million units worth $36m.
ETP provider CoinShares said bitcoin is only just emerging as a store of value and volatility is to be expected, therefore the recent price movements are not a surprise.
Aside from investors taking profit, recent comments by the US Treasury are also a likely catalyst for this sell-off as it highlights bitcoin’s sensitivity to regulation, and that as it matures as a store of value, it will garner regulatory scrutiny, according to the issuer.
"We feel this is likely a short term flush-out," added Frank Spiteri, chief revenue officer at CoinShares. "Skew reports that aggregated open interest on bitcoin futures hit all-time highs of $7.4bn on 24 November."
"This has since come down to about $6.1bn, but still remains higher than the previous all-time high of $5.7bn in late August, so still at elevated levels."
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