Bitcoin, the King of all cryptocurrencies, embarked on a rollercoaster ride on Wednesday, experiencing a swift 7% plunge from its lofty $64,000 peak. The rapid surge earlier in the day, propelling Bitcoin above the $60,000 mark for the first time since November 2021, was followed by an abrupt downturn to $59,400, leaving traders in a turbulent market scenario.
The Rise – Factors Driving Bitcoin’s Rise
Bitcoin’s remarkable ascent, reaching heights unseen in over two years, has been fueled by a confluence of factors.
A staggering 42% price surge in February, marking its biggest monthly rise since December 2020, has contributed to Bitcoin’s surge on Wednesday. Notably, the approval of U.S. spot Bitcoin ETFs has played a pivotal role in attracting capital inflows into the market. Grayscale, Fidelity, and BlackRock’s ETFs witnessed a surge in trading volumes, signalling a growing interest in cryptocurrencies as a formidable asset class.
The impending April halving of Bitcoin followed by post-halving correction, as well as the anticipated U.S. Fed rate cuts in the coming months altogether contributed to the increased surge in Bitcoin skyrocketing up to $64000!
The Fall – Factors Behind Bitcoin Plumetting 7%
However, the euphoria was short-lived as Bitcoin faced an unexpected 7% plunge caused by multiple factors. A staggering $700 million in losses for all digital assets over the past 24 hours underscored the bloodbath for leveraged traders.
The market turmoil extended beyond Bitcoin’s immediate sphere, affecting various digital assets. The CoinDesk 20 Index, which represents a broader market sentiment, experienced an almost 5% drop after achieving an all-time high of 2,260 earlier in the day. Major cryptocurrencies such as ETH, Solana’s SOL, XRP, Cardano’s ADA, DOGE, and Avalanche’s AVAX followed, dropping by 4%-9% within an hour.
A significant contributor to the sell-off was the culmination of $700 million in liquidations across all digital assets within 24 hours.
Leveraged derivatives trading positions faced closure due to this massive liquidation, impacting both long and short position trades. The scale of liquidations witnessed on this day was comparable to the large wipe-out in August when Bitcoin’s sudden drop to $25,000 liquidated $1 billion in derivatives positions across the crypto landscape.
This wild price action also set records for trading volumes in U.S.-listed spot Bitcoin ETFs. BlackRock’s IBIT alone saw a staggering $3.3 billion in shares traded, more than double the previous day’s record-breaking figures. Collectively, spot ETFs recorded close to $8 billion in trading volume, underscoring the heightened volatility and investor activity during this period.