Bitcoin plunged along with other cryptocurrencies on Saturday, in another indication of the risk aversion sweeping across financial markets.

The largest digital token fell as low as US$42,296 before paring some of the tumble. It was trading at about US$48,300 as of 10:31 a.m. in New York on Saturday, a drop of about 10%. The token has now declined more than 20% from the all-time high of more than US$69,000 seen on November 10.

Ether, the second-largest token, fell as much as 17.4% before trimming the retreat to about 4%. The overall crypto sector has shed around a fifth of its value, sliding to US$2.2 trillion, according to tracker CoinGecko.

It’s not unheard of for cryptocurrencies, which trade 24/7, to swing wildly on weekends. That’s owing to a few factors, including thinner trading volumes and a market structure that consists of hundreds of disconnected exchanges that in effect are their own islands of liquidity.

“As usual, since crypto traders deploy leverage it results in cascading sell orders and liquidations,” said Antoni Trenchev, co-founder of crypto lender Nexo. “We should find support around US$40,000 to US$42,000 and then rebound in line for a end-year rally. If that does not hold, we might revisit the July lows of US$30,000 to US$35,000.”

The swings in cryptocurrencies come amid a volatile period for financial markets. Spiking inflation is forcing central banks to tighten monetary policy, threatening to reduce the liquidity tailwind that lifted a wide range of assets.

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“The decline was likely in part technically-driven, exacerbated by the derivatives market, and not helped by the downside momentum behind high-growth stocks on Friday, to which Bitcoin has been positively correlated,” wrote Katie Stockton, founder and managing partner of Fairlead Strategies, an independent research firm focused on technical analysis.

The omicron variant of the coronavirus has also led to risk aversion over concerns about what it might mean for global economic reopening.

Global stocks are down more than 4% from a record in November, while haven assets like Treasuries have rallied.

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Some leveraged buyers of Bitcoin were flushed out in Saturday’s crash, according to Vijay Ayyar, head of Asia Pacific with crypto exchange Luno in Singapore.

“Markets have also been jittery with all the uncertainty around omicron, with cases now appearing in many countries,” he said. “It’s hard to say what that means for economies and markets and hence the uncertainty.”

Despite the most recent declines, Bitcoin is still up more than 60% this year, a return that exceeds many other assets -- and El Salvador’s President Nayib Bukele said the country had again bought the dip, adding 150 coins. The nation this year adopted Bitcoin as legal tender.

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