Bitcoin Price Drops With $80 Million Wiped Out In 24 Hours
The crypto market is a sea of red after the wipeout of millions of dollars of leveraged long positions, as cautious investors digest US inflation data.
Bitcoin has fallen 6% in the past week, down to $23,274 on Tuesday. The world’s largest cryptocurrency by market capitalization has fallen from a peak of over $25,000 a week ago.
Cautious investors are analyzing the persistent inflation concerns in the US, which have raised the possibility of the Federal Reserve carrying out more aggressive rate hikes than previously thought.
Read more: Crypto live prices
There is now a growing expectation of a rate hike of 50 basis points (bp) instead of the expected 25 bp at the next meeting of the Federal Open Market Committee (FOMC), which is scheduled for March 15-16.
Interest rate hikes dry up the money supply and encourage savings in US dollars instead of investing in high-risk assets like bitcoin (BTC-USD) and ethereum (ETH-USD).
The cryptocurrency’s market cap is now $1.11tn, down 1.0% change in the last 24 hours, according to data from CoinGecko. The reason for the latest decline appears to be two-fold, uncertainty about inflation and the tightening web of crypto regulation in the US, UK and Europe.
A wipeout of nearly $80 million in leveraged crypto long positions has compounded the current price decline.
Read more: Crypto: How to get funding for your technology start-up
According to data from CoinGlass, 28,201 traders were liquidated in the last 24 hours, with the total liquidation amounting to $79.43 million.
The largest single liquidation order occurred on the Seychelles-based Bitmex exchange, with the liquidation of a bitcoin to US dollar long position valued at $4.24 million.
Inflation uncertainty only began last week when the US consumer price index (CPI) and producer price index, or PPI, for January both came in higher than investors expected.
This is a problem because investors were convinced that inflation would continue to cool.
Inflation is down from its peak in the summer of 2022, but recent measurements have shown that it has a surprising persistence.
The PPI index rose 5.4% in January from a year earlier, the US Commerce Department said on Friday.
This has come as an unexpected turnaround after almost six months of relatively steady cooling.
Analysts are now predicting that inflation in the US will persist longer, and that the US may be on the brink of another wave of inflation, despite the subsequent interest rate hikes.
All of this means that the Federal Reserve could raise interest rates even higher in response, meaning less money available for speculation in high-risk assets like crypto.
See: Ukraine buys military equipment with crypto | Crypto Mile
