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Bitcoin below $50K briefly as leverage takes ‘savage beating’

By Robert Davis

21:24, 8 December 2021

Cryptocurrency exchange
Could the crypto market be ready for a reset? - Photo: Shutterstock

Bitcoin briefly dropped back below $50,000 per unit by 10:30 UTC on Wednesday as the asset’s leverage took a “savage beating,” according to some analysts.

The largest digital asset by market capitalisation recovered at 20:00 UTC and was trading at more than $50,800 per unit.

Other popular assets like Ethereum and Solana were affected by Bitcoin’s brief fall. Ethereum fell to $4,200 per unit before recovering to $4,415, representing a 3% gain.

Solana fell to $185.43 per unit before climbing back to $193.19.

‘Savage beating’

Analyst Ashwath Balakrishnan at Delphi Digital wrote in a note to investors that the overall market has seen “sentiment take a turn for the worse” which has led to leveraged long trades taking a “savage beating.”

For example, Balakrishnan says that open interest fell from approximately $30bn in late November to nearly $15bn by 6 December.


0.54 Price
+0.820% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01168


3,335.38 Price
+4.140% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00


62,413.30 Price
+3.800% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00


383.80 Price
+3.270% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.50

However, he adds that deep deleveraging events like the one Bitcoin experienced often “pave the path for bullish setups.”

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Changing market composition

The recent pullback also represents a changing market composition, Balakrishnan argues. He says that having too many long-leveraged traders is often a sign that upside may be limited.

“There’s logic behind why open interest and its composition matter,” Balakrishnan wrote. “Too many leveraged longs and a lack of spot buying is a sign that a market is peaking.

“Wiping out some of this open interest gives the market a reset,” he added.

Read more: Bitcoin cash price prediction: is the altcoin a dip buy?

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided in this article is for information purposes only and should not be understood as investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents and has not been prepared in accordance with the legal requirements designed to promote investment research independence. While the information in this communication, or on which this communication is based, has been obtained from sources that believes to be reliable and accurate, it has not undergone independent verification. No representation or warranty, whether expressed or implied, is made as to the accuracy or completeness of any information obtained from third parties. If you rely on the information on this page, then you do so entirely at your own risk.

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