Bitcoin’s (BTC) attempt to rally during US trading hours on Friday proved unsuccessful, resulting in a noticeable price decline. The leading cryptocurrency tumbled from $65,000 to below $62,000 and then further down to $60,500. This drop led to significant liquidations, with $290 million wiped out from both long and short positions within the past 24 hours.
What Caused the Price Drop?
The previous recovery rally, bolstered by the anticipation of the FOMC meeting and positive July CPI data, contributed to Bitcoin’s rise. However, the long-expected interest rate cut did not materialize, shifting attention to September. This shift deflated enthusiasm in the cryptocurrency market, causing prices to fall.
Additionally, a weak US employment report for July triggered a decrease in bond yields and the dollar. Normally, such a scenario boosts risky assets like stocks and Bitcoin, but that was not the case this time. Bitcoin initially rose above $65,000 but later declined below $62,000.
Which Factors Influenced Liquidations?
Analysts at QCP Capital noted that the high unemployment figures spurred recession fears, impacting crypto markets. The VIX index surged above 28, its highest since the regional banking crisis in March, signaling increased market volatility. Despite recent price fluctuations, expectations indicate that volatility would subside towards the summer.
Significantly, Genesis Trading’s transfer of over $1.5 billion in Bitcoin and Ethereum contributed to the downward trend. In this uncertain environment, BTC declined by 2.2%, while ETH saw a 2.5% correction.
Key Insights for Investors
- High unemployment rates can spur recession fears, affecting crypto prices.
- Large transfers by major trading firms can trigger significant market movements.
- Market volatility indices like VIX can provide insights into future price stability.
- Understanding the impact of macroeconomic data on crypto can guide investment strategies.
Data from CoinGlass revealed Bitcoin liquidations totaling $90 million. Ethereum and Solana followed suit, with liquidations of $80.21 million and $20.86 million, respectively. Furthermore, net outflows from Bitcoin ETFs on August 2 amounted to $237 million, highlighting ongoing market uncertainty. Grayscale’s GBTC saw a net outflow of $45.94 million, Fidelity’s FBTC $104 million, and BlackRock’s IBIT $42.81 million in just one day.