Bitcoin experienced a significant drop of nearly 10% in just a few hours, causing panic in the market as many other cryptocurrencies lost more than 20% of their value. This has pushed cryptocurrencies into what is known as “bear market” territory, defined by price drops of 20% or more. The largest cryptocurrency by market capitalization, Bitcoin, saw its value drop to around $57,000 from its all-time high of over $73,000 in mid-March, marking a decrease of more than 20%.
Analysts attribute the selling pressure in the cryptocurrency market to the lack of attention on spot ETFs in Hong Kong and investor concerns about interest rates. The CoinDesk 20 (CD20) market index also fell by significant margins, with other cryptocurrencies like Ethereum (ETH) and Solana (SOL) recording losses of 9-11%. Currencies with capitalizations in the hundreds of millions experienced drops of 15-25%.
Futures trading positions worth nearly $100 million on exchanges were liquidated in just one hour, totaling almost $500 million in liquidations over a 24-hour period. This was due to the high leverage allowed in futures contract trading, where liquidation occurs when trading losses exceed the initial deposit amount. The dismal performance of cryptocurrencies mirrored that of traditional markets, with the Nasdaq index falling by 2% and the S&P 500 by 1.6%.
Market strategist Joel Kruger pointed out that expectations for interest rate cuts by the US Federal Reserve are lower as inflation remains high, impacting the cryptocurrency market negatively. This is exacerbated by the return of favor towards the USD, putting additional pressure on cryptocurrencies. With Bitcoin and the cryptocurrency market on track for their worst monthly decline since November 2022, investors are bracing for further turbulence ahead.