Bitcoin Tumbles Most Since May and El Salvador Buys the Dip

Bitcoin tumbled 11.3%, the most since May, leading a broad retreat from digital assets even as bullish investors touted El Salvador’s adoption Tuesday of the largest cryptocurrency as legal tender.

As of press time bitcoin was changing hands around $46,7561, down from over $52,000 earlier in the day. At one point during the selloff the largest cryptocurrency tumbled as low as $42,900.

The “[market] had been getting ahead of itself, lots of complacency,” Fredrick Collins, an options trader and researcher at Glassnode, told CoinDesk.

The sell-off triggered liquidations of billions of dollars of trading positions due to margin calls, across both centralized and decentralized exchanges. According to the website Bybt, about $3 billion of liquidations were recorded in the past four hours.

One perspective is that the correction might help to reset cryptocurrency markets, with excessively leveraged trading positions getting shaken out.

“This was a healthy event today,” Collins said.

All major cryptocurrencies were in the red.

Ether, the native cryptocurrency of the Ethereum blockchain, tumbled 20% to $3,138, while Cardano’s ADA token lost 23%. Uniswap’s UNI token fell 27% and XRP was down 28%.

El Salvadorian President Nayib Bukele, whose push to adopt bitcoin as legal tender took effect this week, tweeted that he was “buying the dip” with “150 new coins added.“

In traditional markets, U.S. stocks fell as investors returned from the three-day Labor Day holiday weekend. Stocks had traded near all-time highs last week and, according to Bloomberg, investors showed fresh signs of caution due to prospects for a growth slowdown amid spreading Delta variant cases of COVID-19.

The U.S. dollar rose in foreign exchange markets. The yield on 10-year U.S. Treasury bonds increased 0.05 percentage point to 1.37%.

CoinDesk’s Omkar Godbole contributed to this report.