Bitcoin, the leading digital currency, suffered a sudden drop, dropping to $66,690 within a day. The decline caused market value to fall to $1.3 trillion, but trading volume soared to $78.6 billion, creating a difficult situation for investors.
The global cryptocurrency market capitalization fell more than 7% to $2.55 trillion, reflecting the decline in Bitcoin. Ethereum (ETH) took the biggest hit, losing more than 9% of its value, along with major players such as BNB, XRP, and Litecoin (LTC). Even popular meme coins Dogecoin (DOGE) and Shiba Inu (SHIB) suffered massive declines of more than 14%.
What's next?
The influence of the Federal Reserve
Today's economic downturn is believed to be caused by a possible Fed rate cut. Federal Reserve Chairman Jerome Powell's recent testimony to Congress suggested the possibility of rate cuts depending on new economic indicators such as inflation and employment data.
Contrary to conventional expectations, rising inflation and signs of recovery in the U.S. economy suggest that rate cuts will be delayed until the end of the year. This uncertainty has led to market volatility, with the US dollar index rising and global stock markets depressed.
Additionally, CME FedWatch data shows a 54% chance of a 25bps rate cut in June and a 47% chance of a similar rate cut in July.
Also read: Kiyosaki prefers Bitcoin over gold and silver because supply remains the same
Option expiration: A boost for cryptocurrencies
The expiration of options contracts on Friday will energize the crypto market, with more than $3 billion worth of Bitcoin and Ethereum options expiring on March 15th. Despite falling as low as $66,770 at one point, BTC managed to stay above the maximum pain threshold, providing a potential buying opportunity amidst the economic downturn.
Similarly, on the expiry of $1.24 billion worth of ETH options, traders maintained their bullish stance, with ETH rebounding from its 24-hour low and trading at $3,748.
Wall Street's reaction
The US Spot Bitcoin ETF sector saw a significant drop in inflows, dropping 80.6% to $133 million on Thursday. The decline was the biggest in eight trading days and coincided with a deterioration in Wall Street sentiment following recent economic data releases.
In response, investors pulled their holdings out of Grayscale's GBTC, likely influenced by market signals such as market peaks before the halving or declines in the gold and stock markets. GBTC recorded $257.1 million in outflows on Thursday, confirming the general market sentiment.
Read more: Bitcoin ETF market heats up as BlackRock IBIT crosses 200,000 BTC
It was a tough journey
The recent liquidity flush in the cryptocurrency market resulted in significant losses of over $821 million in market value. Nevertheless, more than 247,800 traders liquidated their positions within his 24 hours. Notably, the single largest liquidation order involved his $13.3 million worth of BTC-USDT swaps on the OKX exchange.
Bitcoin and Ethereum took the brunt of liquidations totaling over $279 million and $137 million, respectively, which some analysts are calling buy-low in anticipation of a potential market rebound. I see it as an opportunity.
