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Monday, October 2, 2023

Bitcoin’s calm shattered by sharp drop, sparking massive liquidations

A calm period in the crypto markets abruptly ended as the prospect of higher interest rates triggered a sell-off in risk assets like Bitcoin, leading to widespread liquidations of bullish positions. Bitcoin’s value dropped from around $29,000 to as low as $25,314 within 24 hours before recovering slightly.

Over $1 billion worth of positions were unwound during the sell-off, according to Coinglass data.

While Bitcoin is still up 60% from its starting value this year, various challenges, including rising bond yields, regulatory pressures, and economic concerns in China, could undermine the appeal of cryptocurrencies.

Traders are closely monitoring the $25,000 Bitcoin level, where further liquidations might occur. Elon Musk’s SpaceX reportedly selling its Bitcoin holdings added to negative sentiment.

Although broader markets experienced a pullback, digital token sell-off continued, with the top 100 tokens falling over 5% at one point. Ether, Cardano, and Solana also experienced declines.

The largest liquidation order worth $55.92 million happened on Binance, marking the biggest Bitcoin liquidation day since the market turmoil of June 2022.

The $25,000 Bitcoin level has significant open interest among put options for August 25 expiry.

If it drops below this level, put sellers would need to liquidate or hedge their positions, adding pressure to prices.

The recent slide has nearly erased the gains following BlackRock’s surprise Bitcoin ETF filing. Despite a 72% surge in Q1, Bitcoin’s value has declined about 7% since March.

Last year, it fell 64% due to bankruptcies. Optimism emerged after reports that the US SEC might permit the first Ether futures-based exchange-traded funds.

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