The cryptocurrency market faced a turbulent Thursday as Bitcoin slid below the $29,000 mark, echoing the decline in traditional stocks. The catalyst behind this downward movement was the U.S. Federal Reserve’s release of meeting minutes on August 16, reaffirming its hawkish stance on monetary policy. In the wake of this revelation, Bitcoin experienced a 2.06% overnight drop, settling at a trading price of $28,535. The ensuing ripple effect resulted in liquidations totaling around $160 million across the crypto sphere.
Remarkably, data provided by Coinglass illuminated that the bulk of these liquidations, accounting for $48 million, pertained to investors holding positions in Bitcoin. The blow primarily impacted long traders, leaving them grappling with substantial losses. Within a 24-hour window, the crypto market bore witness to an overall liquidation of $158.12 million, impacting 54,608 traders who faced the brunt of this unexpected market movement.
Unsurprisingly, the hardest hit were long traders, who collectively absorbed approximately $140 million in losses. Both Bitcoin and Ethereum, the two largest cryptocurrencies, contributed significantly to these losses, collectively accounting for a staggering $62.67 million decrease in value. In stark contrast, short traders faced losses that were notably lower, amounting to less than $20 million.
Meanwhile, the traditional equities market allegedly painted a similar picture of decline, as the S&P 500 index continued its downward trajectory, slumping by 0.76%. Adding to the market volatility, the dollar index (DXY) rose by 0.54% within the week, bolstered by the Fed’s stance on interest rates.
The central bank, in its policy rate meeting the previous month, hiked the benchmark interest rate to a 22-year high, reaching a range of 5.25% to 5.50%. This move was an anticipated continuation of the aggressive rate increases that began in March 2022, aimed at curbing rampant inflation.
Market experts had anticipated that the rate hike cycle might be approaching its conclusion, given the substantial increases since the interest rate was near zero in March 2022. The Fed’s tightening of monetary policy has played a pivotal role in curbing the upward trajectory of risk assets like stocks and cryptocurrencies.
Currently, Bitcoin is trading at $28,500.38, registering a 2.16% decline within the last 24 hours. In a similar vein, Ethereum experienced a 1.78% drop, bringing its price down to $1,789.93. These fluctuations underscore the sensitivity of the crypto market to external factors such as central bank policies and economic indicators.
