Amidst a larger crypto selloff, Bitcoin produced another bout of its infamous volatility with a quick but significant decline toward $40,000.
As of 7:15 a.m. on Monday in London, the largest token had fallen as far as 7.5% to $40,521 before partially recovering its losses to trade 3.6% lower at $42,245.
Smaller coins like Cardano, XRP, Ether, and Polkadot also saw losses. A measure of the top 100 digital assets fell by about 4%, marking the worst decline since November 22.
This year, Bitcoin has surged because of the anticipation that regulators may 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.
“Market leverage had increased significantly,” stated Richard Galvin, a co-founder of Digital Asset Capital Management located in Sydney. “Rather than any fundamental news catalyst, the current decline appears to be the result of market deleveraging.”
As of 7:15 a.m. in London on December 11, over $312 million worth of cryptocurrency trading positions that were gambled on higher prices were liquidated, according to Coinglass data. This is the largest amount since at least mid-September.
Awaiting the Fed
This week’s US inflation statistics and the Fed’s final policy meeting in 2023 are expected to test investors’ bold bets on rate cuts. As a measure of caution, the dollar index increased on Monday, causing global markets and US share futures to tremble.
Profit-taking is expected, says IG Australia analyst Tony Sycamore. He also believes dip buyers will support prices between $37,500 and $40,000.
The rise in bitcoin has helped the price of digital assets recover more broadly after falling by more than 150% in 2022. The token is still well below its record from the epidemic era, which was around $69,000 and set more than two years ago.