Bitcoin, the king of all cryptocurrencies, had a roller coaster ride on Wednesday, plummeting 7% from a high of $64,000. The sharp surge earlier in the day, which saw Bitcoin surpass $60,000 for the first time since November 2021, has since fallen sharply to $59,400, leaving traders in a turbulent market scenario.
Rising – What is driving Bitcoin’s rise
Bitcoin’s spectacular rise, reaching heights not seen in the past two years, has been fueled by a confluence of factors.
The price surged 42% in February, the biggest monthly gain since December 2020 and contributed to Bitcoin’s surge on Wednesday. In particular, the approval of US spot Bitcoin ETFs has been pivotal in attracting capital inflows into the market. ETFs from Grayscale, Fidelity and BlackRock have seen a surge in trading volume, indicating growing interest in cryptocurrencies as a powerful asset class.
The upcoming Bitcoin halving in April, the subsequent halving revision, and the expected U.S. Federal Reserve interest rate cuts in the coming months have led to Bitcoin’s surge up to $64,000!
Fall – What caused Bitcoin to plummet 7%
However, this euphoria was short-lived as Bitcoin faced an unexpected 7% plunge due to a number of factors. The massive loss of $700 million across all digital assets in the last 24 hours further highlighted the bloodbath for leveraged traders.
The market turmoil extended beyond the immediate realm of Bitcoin and affected a variety of digital assets. The CoinDesk 20 index, which gauges broader market sentiment, fell nearly 5% after hitting a record high of 2,260 this morning. Subsequently, major cryptocurrencies including ETH, Solana’s SOL, XRP, Cardano’s ADA, DOGE, and Avalanche’s AVAX fell 4%-9% in one hour.
A major contributor to the sell-off was the peak liquidation of $700 million across all digital assets within 24 hours.
This large-scale liquidation resulted in the closure of leveraged derivatives trading positions, impacting both long and short position trading. The size of the liquidation witnessed today was similar to the massive liquidation of $1 billion in derivatives positions across the cryptocurrency industry in August when Bitcoin plummeted to $25,000.
This wild price action also set a record for trading volume for the U.S.-listed spot Bitcoin ETF. BlackRock’s IBIT alone saw $3.3 billion worth of shares traded, more than double the previous day’s record figure. Overall, spot ETFs recorded close to $8 billion in trading volume, supporting heightened volatility and investor activity during this period.