Amidst a wider cryptocurrency selloff, Bitcoin experienced a brief but steep decline towards $40,000, displaying yet another example of its remarkable volatility.
The biggest token saw a 7.5% drop to $40,521 before reversing some of the losses and closing 3.7% lower at $42,165 at 1:05 PM Singapore time on Monday.
Additionally, smaller tokens like Cardano, XRP, Ether, and Polkadot dropped. With the biggest decline since November 22, an index of the top 100 digital assets fell by roughly 4%.
This year, Bitcoin has surged due to anticipation that regulators will approve the first US exchange-traded funds to invest directly in the token, thereby expanding the pool of possible cryptocurrency investors. There has been a surge in virtual currencies, including Bitcoin, due to bets that the Federal Reserve will lower interest rates in 2024.
According to Sydney-based Richard Galvin, co-founder of Digital Asset Capital Management, market leverage has significantly increased. Rather than a fundamental news catalyst, the current decline appears to be the result of a market deleveraging.
The largest such total since at least mid-September, charts indicates that as of 1:05 p.m. in Singapore on December 11, approximately $299 million worth of cryptocurrency trading positions betting on higher prices had been liquidated.
Awaiting the Fed
This week’s US inflation data and the Fed’s final policy meeting of 2023 are expected to test investors’ bold bets on rate cuts. As a measure of caution, the dollar index increased on Monday, causing global stocks and US equity futures to tremble.
According to IG Australia Pty. Ltd. market analyst Tony Sycamore, it makes sense to observe some profit-taking. Falling prices between $37,500 and $40,000 should be “well-supported” by dip buyers, according to him.
After plunging more than 150% in 2022, the price of digital assets has recovered more broadly, spurred by the rise in bitcoin. The token is still much below its record from the pandemic era, which was almost $69,000 and set more than two years ago.
