Bitcoin took a wild ride, making a swift drop toward $40,000 amidst a broader cryptocurrency sell-off, showing its usual rollercoaster-like swings. The biggest cryptocurrency plummeted by as much as 7.5% to hit $40,521, before bouncing back slightly to trade 3.6% lower at $42,245 by 7:15 a.m. on a Monday in London.
Other cryptocurrencies like Ether, XRP, Polkadot, and Cardano also experienced declines. An index reflecting the top 100 digital assets saw a 4% dip, the most significant fall since November 22nd.
This year, Bitcoin has surged on expectations of US regulators greenlighting the first direct investment in the token through exchange-traded funds (ETFs), potentially attracting more investors to crypto. Additionally, bets on the Federal Reserve reducing interest rates in 2024 have fueled the rally in Bitcoin and the broader realm of virtual currencies.
Richard Galvin, co-founder at Digital Asset Capital Management in Sydney, noted, “Market leverage had risen materially,” suggesting that the recent drop seems more like a market readjustment than a response to any significant news.
Data from Coinglass revealed that around $312 million worth of crypto trading positions, banking on higher prices, were closed out on December 11th in London— the highest such figure since at least mid-September.
Investors are on edge this week with impending US inflation stats and the Fed’s final 2023 policy meeting, which could challenge the aggressive bets on rate cuts. Global stocks and US equity futures hesitated on Monday, with a slight rise in a dollar index indicating cautious sentiment.
Tony Sycamore, a market analyst at IG Australia Pty, mentioned that a bit of profit-taking seems reasonable. He anticipates that declines towards the $37,500 to $40,000 range will likely be supported by buyers aiming for a rebound.
Bitcoin has surged over 150% this year, triggering a broader recovery in digital assets following a $1.5 trillion decline in 2022. However, it’s still far from its pandemic-era peak of almost $69,000, set just over two years ago.
