Bitcoin’s (BTC) recent drop below the $30,000 level sent smaller cryptocurrencies tumbling Wednesday afternoon, with BTC’s price falling to as low as $29,874, a 1.8% decline over the past 24 hours according to market indices data. The token pared some of the losses later, and was trading slightly above $30,000. This caused a sudden sell-off in altcoin markets, with the Optimism network’s OP token dropping 10%, and Cardano’s ADA, Polygon’s MATIC and Avalanche’s AVAX suffering the largest falloffs among the top 20 cryptocurrencies, losing 6%, 7.7% and 8%, respectively. Ether (ETH) held up better than most altcoins but underperformed BTC, sliding 3.2%.
The decline extended BTC’s grip over the broader digital asset market, with the BTC dominance rate soaring above the 52% level for the first time since April 2021, according to TradingView data. This was likely due to the recent frenzy of institutional investment activity, such as traditional finance heavyweight BlackRock filing for a sought-after spot BTC exchange-traded fund (ETF). Regulatory risks also weighed on the performance of smaller cryptocurrencies, with the U.S. Securities and Exchange Commission (SEC) deeming a handful of tokens unregistered securities in lawsuits.
With some newer tokens facing intensified regulatory scrutiny in the U.S., BTC has pulled ahead in 2021, said Kyle Waters, analyst at digital asset research firm CoinMetrics. We can see that BTC’s 85% return, year-to-date is outpacing most of the other major digital assets. The price downturn caused $115 million of losses during the day to traders with long positions betting on higher prices, according to CoinGlass data.