Bitcoin freefalls amid move away from risky assets

Bitcoin and cryptocurrency bulls were sent to the abattoir this weekend following a brutal sell-off that signalled a broader shift away from riskier investments.

Bitcoin, the mother of cryptocurrency, briefly plunged 15.9% to lows of US$42,000 at 2 pm AEST on Saturday, according to CoinDesk. Similarly, the market capitalisation of all cryptocurrencies (excluding Bitcoin) fell more than 20%.

The sell-off followed an ominous session for the US markets. After opening in positive territory, all three major US indexes slumped into negative territory.

The risk-off attitude was fueled by concerns that the Federal Reserve (The Fed) might accelerate the place of removing stimulus measures, a tailwind that helped drive a wide range of assets.

The omicron variant is another factor driving risk aversion over concerns of what it might mean for the global economy.

The flight to safety witnessed US Treasury yields fall at a pace not seen since the beginning of the pandemic last year. Yields move inversely to prices.

Other safe haven assets like gold and silver also posted small gains in overnight trade.

More specifically for Bitcoin, Larry Cermak at The Block Research flagged that nearly US$5bn in open interest was wiped in the height of the sell-off.

Open interest represents the total number of futures contracts held by market participants. It is used as an indicator to determine market sentiment and the strength behind price trends, according to CME Group.