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For the first two weeks of February, bitcoin has gained in value in a relatively stable manner. As a result, the crypto community started to ignore the main disadvantage of the digital asset - its high volatility. Over the past three days, the situation has changed dramatically. The price of bitcoin continued to advance, hitting new all-time highs. However, its rally has been accompanied by sharp declines, resulting in huge losses on the global trading floors.
Crypto exchanges liquidated the positions of 88,000 users over the past day to avoid large financial losses. This happened after bitcoin reached a historical high of $50,600, then fell by almost $3,000, and settled at the level of $47,700. Today, bitcoin has once again broken above the $50,000 threshold.
For many traders, this fall in price has become fatal. One investor lost almost $10 million worth of the cryptocurrency. The total losses of users of exchanges amounted to nearly $573 million. This amount is much less than February 15. However, the intervals between price spikes have decreased significantly.
Although bitcoin continues to extend gains and has already successfully consolidated around the level of $50,000, the situation in regard to the first cryptocurrency remains uncertain. Bitcoin's slump underlines nagging questions over its strength and stability. It can fall sharply in value after a strong run. Over the past three days, traders around the world have lost more than over the entire last week.
Such dynamics suggests that even a constant flow of positive news cannot stop a correction in the market, which is having a destructive effect on bitcoin. There is no doubt that the digital asset will soar more than once in February. However, its subsequent sharp drops are likely to be more frequent and detrimental to investors.
Moreover, bitcoin's instability may have a severe impact on the cryptocurrency market, which is now strongly dependent on the main asset's dynamics. The only currency that showed independence amid market euphoria was Litecoin. However, even this asset is unable to stay firmly against the backdrop of a market downturn. This suggests that not all digital assets gain ground along with bitcoin. However, all of them will most likely suffer in case the main asset tumbles.
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