Crypto selloff wipes out $50bn overnight as bitcoin and ethereum plunge

Representation of Bitcoin and Ethereum cryptocurrencies are seen in this illustration photo taken in Krakow, Poland on September 18, 2022. (Photo by Jakub Porzycki/NurPhoto via Getty Images)
The cryptocurrency market cap fell by over 6% on Wednesday, losing nearly $50bn. Photo: Jakub Porzycki/NurPhoto via Getty

The cryptocurrency market cap fell by over 6% on Wednesday, losing nearly $50bn (£46.8bn) in a dramatic downturn after an early week rally against global currencies such as the pound (GBPUSD=X) and euro (EURUSD=X).

Bitcoin (BTC-USD) fell over 7% to $18,766 while ethereum (ETH-USD) also nosedived more than 7% to $1,284.

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Bitcoin still showed a tendency to march in lockstep with equity markets, such as the S&P 500 (^GSPC) and Nasdaq (^IXIC).

However, analysts saw this week's early rally as world currencies tumbled as a sign that bitcoin's forecasted "de-coupling" from traditional markets was near at hand.

The combined cryptocurrency market spent much of early Tuesday in the green before falling. Analysts suggested investors became cautious over deeper concerns about inflation and the global economy.

Bitcoin has a tendency to spike around this time of the year — a factor which may have figured in Tuesday’s price increase.

The bitcoin chart has formed a "Bart Simpson" with a rapid rise on Tuesday and a spiked plateau followed by an equally sharp decline.

On Tuesday bitcoin significantly outperformed all major currencies, apart from the dollar.

The Chinese yuan (CNY=X) is rapidly weakening, with Beijing's monetary authorities hinting at bringing back a yuan rate-setting process they abandoned two years ago.

The euro fell consistently against the dollar since early September, and before Wednesday's crypto-slump the euro fell 3.5% against bitcoin (BTC-EUR).

Watch: 'Bitcoin will eat into global finance until it's $1m per coin' | The Crypto Mile

Before Wednesday's market sell-off, bitcoin had also performed well against the yen, down 0.7% against bitcoin (BTC-JPY) in the past week.

Gold (GC=F) was down 1.7% against bitcoin.

Investors have been seeking shelter in the US dollar as the British pound fell almost to parity.

Read more: Bitcoin price surges over 7% as pound tanks

Bitcoin reacted strongly against the falling pound in the lead-up to the market slump, with the pound declining by over 5% against bitcoin.

Although it was short-lived, this strong performance of bitcoin against global fiat currencies was deemed significant by proponents of the cryptocurrency sector.

Watch: US senator: 'Digital assets will be as big as the internet itself' | The Crypto Mile