It has been recently revealed that apart from the announcements from Tesla and China, the margin effect of Bitcoin is driving fluctuations in the crypto markets. After some sessions of the market heading towards stability in its prices, the prices of the cryptocurrencies are back in the red zone. Bitcoin Margin Effect and Fluctuations in Crypto Market The negative price actions appear to have affected altcoins the most and at the time of writing this article, the major altcoins were down by almost 30%. Talking specifically, Ethereum was down around 11%, Binance Coin and Cardano were down by approximately 12%. The meme currency Dogecoin slipped 9%, Ripple was down 13%, and both the Internet Computer and Polkadot were down 9.5%. However, it should be noted that the loss faced by Bitcoin was less severe as it was down 8% in the past 24 hours, while the fall fades in comparison to the price cuts we witnessed in the Bitcoin markets last week. It can not be ignored that the market has shaved off quite a bit of the progress that Bitcoin has made toward its recovery over the past week. The Real Driver Behind the Fluctuations In a report shared by a leading market data aggregator, it was revealed that: “Traders taking excessive risk in unregulated cryptocurrency markets were forced to sell when prices started to drop. Therefore, what may have been a minor correction in the price of Bitcoin spiraled into a price drop of roughly 30 percent.” Talking about how margin trading works, the trader borrows cash from an exchange or brokerage firm that provides him with the allowance to take a larger position in the asset than their holdings would originally allow. The only thing different in margin trading in Bitcoin and cryptocurrency is the lack of regulation. Moreover, the automatic sell-off triggers present are powerful. Brian Kelly, the CEO of BKCM said: “Everybody’s liquidation price tends to be somewhat near everyone else’s, when you hit that, all of these automatic sell orders come in, and the price just cascades down.”
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