Bitcoin’s brief but sharp tumble toward $40,000, accompanied by a broader selloff in the crypto market, signals a potential deleveraging phenomenon rather than a fundamental news catalyst.
On Monday, the largest cryptocurrency plunged as much as 7.5% to $40,521 before recovering some losses to trade 3.7% lower at $42,165 at the time of writing.
The downward trend extended to smaller tokens such as Ethereum (ETH), XRP (XRP), Polkadot, and Cardano (ADA), all of which witnessed declines.
The top 100 digital assets, as measured by an index, dropped approximately 4%, marking the most significant decline since November 22.
Bitcoin (BTC) has been on a remarkable rally this year, driven by expectations of regulatory approval for the first US exchange-traded funds directly investing in the cryptocurrency.
This anticipation has expanded the potential investor base for cryptocurrencies.
Additionally, bets on the Federal Reserve cutting interest rates in 2024 have further fueled the rally in Bitcoin and the broader virtual currency market.
Richard Galvin, co-founder at Digital Asset Capital Management in Sydney, highlighted the substantial rise in market leverage, attributing the recent fall to a market deleveraging rather than any specific fundamental news catalyst.
“The current fall looks like a market deleveraging as opposed to any fundamental news catalyst.”
Coinglass data shows that approximately $299 million worth of crypto trading positions, betting on higher prices, were liquidated on December 11, marking the highest tally since mid-September.
As investors brace themselves for US inflation data and the Federal Reserve’s final policy meeting of 2023, there is a sense of caution surrounding aggressive wagers on
Read more on cryptonews.com