Crypto Flash Crash Wipes Out $400 Billion In Market Value On El Salvador's Bitcoin Day

Crypto Flash Crash Wipes Out $400 Billion In Market Value On El Salvador's Bitcoin Day

Topline

The cryptocurrency market posted staggering losses Tuesday as a wave of selling pummeled the prices of nearly every single coin—unraveling the gains priced in by a retail trading mania ahead of El Salvador's first day accepting bitcoin as legal tender.

Key Facts

The value of the world's cryptocurrencies plunged to a low of about $1.9 trillion by 11:15 a.m. EDT on Tuesday, nearly 15% less than 24 hours prior and reflecting a loss of more than $410 billion, according to crypto-data website CoinMarketCap.

Heading up market value losses, the price of bitcoin dipped 10% to $44,672—the lowest price in nearly three weeks.

Meanwhile, ether, binance coin and Cardano's ada plunged between 13% and 18% apiece, while Solana was the only token posting an increase in value, climbing 8% after a stunning run-up of nearly 36% over the past week.

In the middle of the flash crash, El Salvadoran President Nayib Bukele announced the country took advantage of crashing prices to purchase an additional 150 bitcoins, boosting its holdings to 550 total coins, worth about $25 million.

Prices quickly pared some of the losses, with bitcoin settling at about $46,810 by 11:50 a.m. EDT, still 9% lower than one day earlier.

Key Background

The steep sell-off came less than one day after JPMorgan analysts warned in a note to clients that recently rallying altcoins—or cryptocurrency alternatives to bitcoin and ether—reflected "froth and retail investor mania," as opposed to sustainable gains for the market. "The August rally in non-fungible tokens and the pickup in decentralized finance activity have helped not only ethereum but also alternative cryptocurrencies that facilitate or plan to facilitate smart contracts, such as Solana, Binance Coin and Cardano," JPMorgan Managing Director Nikolaos Panigirtzoglou said Monday. "The previous phase of retail investors’ mania into cryptocurrency markets was between the beginning of January and mid-May... and retail investors are making cryptocurrency markets look frothy again." After the bouts of retail-investing mania in January and May, crypto markets crashed about 13% and 50%, respectively.

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