Market Summary: Bitcoin plummets, El Salvador buys Bitcoin at the bottom

Bitcoin fell sharply on Tuesday, falling nearly 19% from the $52,000 resistance level at one point. The drop came just after El Salvador bought 200 BTC on Monday before the Central American country’s Bitcoin law came into effect. Under the law, BTC is now accepted as legal tender.

BTC’s sharp drop triggered the liquidation of about $3 billion in trading positions, with about $1 billion of selling occurring around 10 a.m. EST. At press time, Bitcoin was trading around $47,000, down 10% in the past 24 hours.

“It is this volatility that makes many in El Salvador less optimistic about the currency’s (BTC) adoption,” Hargreaves Lansdown, a U.K. financial services firm, wrote in an email to CoinDesk. “It is risky to trade in the currency when there is so much uncertainty about its future price,” the firm wrote.

Latest Price

Bitcoin (BTC): $46,896, -9.7%

Ether (ETH): $3,432, -13.1%

S&P 500: -0.3%

Gold: $1,818, -0.6%.

The 10-year Treasury yield closed at 1.371%

El Salvador’s President Nayib Bukele tweeted on Tuesday, “Accumulated 150 BTC” and “Buy the dip in BTC.”

Crypto supporters reportedly bought $30 worth of Bitcoin each to mark El Salvador’s decision, colloquially known as “Bitcoin Day.” However, over the past month, it seems that much of the good news has been wiped out.

“The market has been overextended for the past six weeks without any notable correction,” Kevin Kang, founding head of cryptocurrency hedge fund BKCoin Capital, wrote in a Telegram message to CoinDesk.

Kang said that when altcoin cryptocurrencies rally, it’s usually a sign of a frothy market. “Bitcoin Cash, Litecoin and EOS” usually make their own moves in the final stages of a cycle, he wrote.

Liquidation and Broker Errors

At 16:55 UTC, Coinbase noted that it was investigating “some order failures due to high volume” and resolved the issue by 17:46. Earlier on Tuesday, Kraken experienced funding delays due to issues with ACH online banking purchases, which were later fixed, CoinDesk’s Nate DiCamillo reported.

Analysts also pointed to signs of a boom led by retail investors to explain the decline.

“Funding rates are not alarmingly high compared to what we saw throughout the first quarter, although history shows that optimistic short-term traders tend to lead to increased volatility as long liquidations accelerate,” Arcane Research wrote in a newsletter on Tuesday.

From a technical perspective, Bitcoin briefly dipped below the 200-day moving average and found support above the breakout level of $42,000. The sell-off came after multiple signs of upside weakness and slowing momentum ahead of the $52,000-55,000 resistance zone.

DeFi market value reaches new high before pullback

The total market capitalization of decentralized finance (DeFi) reached an all-time high of nearly $140 billion shortly before Tuesday’s crypto crash. Some analysts pointed to Ethereum’s London network upgrade as the source of the bullish enthusiasm that has extended to DeFi tokens over the past two months.

Bitcoin fund flows turn positive

Investors are easing back into digital asset investment products after weeks of outflows. For the third week in a row, cryptocurrency funds saw inflows totaling $110 million, according to a report from CoinShares.

Bitcoin inflows in particular, totaling $59 million, “signal a potential turnaround in investor sentiment,” CoinShares wrote.

Solana-focused funds attracted $13.2 million in inflows last week as the cryptocurrency’s price surged nearly 74%. Ethereum products also saw inflows last week and now account for a record 28% market share of all digital asset investment products.

Altcoin Market

Bored Ape Yacht Club NFT Collection Sells for $19 Million at Sotheby's Auction: A non-fungible token (NFT) collection of 101 bored-looking apes sold for a top price of $19 million at Sotheby's, exceeding the auction house's original estimate of $12 million to $18 million. Currently, the "reserve price" for a single Bored Ape - the minimum price you can get one - is 40 WETH on OpenSea, about $140,000. Next, BAYC will appear in an online auction at Christie's auction house from September 17 to September 28.

Litecoin Supporters Can Now Create NFTs: Litecoin has launched OmniLite, a second-layer protocol that enables the creation of stablecoins and smart contracts on the blockchain. The launch of the protocol will also enable the creation of NFTs. As reported by Christie Harkin of CoinDesk, OmniLite is based on the earlier Omni protocol as a second layer to the Bitcoin blockchain. According to the announcement, "tokens created through OmniLite can be considered derivatives of Litecoin, and therefore, transactions of these tokens are recorded on its blockchain."

Cardano announces mainnet smart contract upgrade for Sunday, September 12: IOHK, the developer behind Cardano, today officially submitted an update proposal to the Cardano mainnet to trigger a hard fork event on Sunday, September 12. Once the proposal is submitted, any ADA token holder can vote on it. Last week, Cardano launched smart contract functionality in a testnet environment. "Congratulations everyone," said Charles Hoskinson, founder of Cardano, on Twitter. "The Alonzo era is coming."