Bitcoin slid by 21% between Sunday and Monday to as low as $32,389 after hitting a record high above $41,000. The bearish movement has made the digital currency suffer its biggest two-day decline since March 2020 and this is beginning to raise concern among investors that the polarizing cryptocurrency boom may run out of steam.
Bitcoin and other cryptocurrencies plunged on Monday wiping off nearly $140 billion in total market cap, as traders took profits on the spectacular rally so far this month in light of a stronger dollar and growing political uncertainty. Bitcoin, the largest cryptocurrency, plunged as much as 21% over Sunday and Monday, though the cryptocurrency is still up roughly 89% on a trailing one-month basis. Ethereum fell 12%. The smaller coins XRP and Litecoin shed about 18% each.
Investors will be keeping a close eye on the political uncertainty in the USA, especially a possible impeachment of President Donald Trump and a surge in COVID-19 cases in Asia. As it stands, the weaker the dollar the stronger for digital currencies. Bitcoin and other cryptocurrencies, similar to many commodities, tend to do the opposite of whatever the dollar is doing.
The correlation between Bitcoin and the dollar index was at -0.95, meaning the two are more likely to move inversely. Correlation is measured between 1.0 and -1.0, with the former signifying that the two assets are prone to moving in perfect tandem. However, some analysts believe that the retreat is likely to be temporary, given the growing number of buyers and owners of cryptocurrencies.