The cryptocurrency market is experiencing a significant correction following the highly anticipated FOMC meeting this week. Bitcoin, the poster child of the industry, fell by 6% and tested support at the critical $61,000 level. Ethereum, the second-largest cryptocurrency, fared no better and remained near the $3,000 support level, down 8 percent. This isn’t just a bump in the road. To some, cryptocurrencies are facing a deeper correction, leaving investors nervous but hopeful for a recovery.
Cryptocurrencies are falling: What’s next?
The pain is clearly visible beyond price declines. Data from Coinglass reveals a massive liquidation event in the last 24 hours, with a staggering $670 million wiped from the market. This liquidation spree targeted both long and short positions, and approximately $500 million in bullish bets were liquidated. When zoomed out, the picture becomes even bleaker. Total crypto market cap has lost $600 billion since last week’s peak of $2.9 trillion. Popular tokens like Ethereum (ETH), BNB, and even meme-backed Dogecoin (DOGE) failed to survive the sell-off.
Analysts at K33 Research warn that the worst may not be over yet. They believe the liquidation of bullish derivative positions, which essentially amplify losses when prices fall, could continue to be a major impediment to a rapid recovery. Their message to investors is clear… “Significant downside volatility remains a risk” as long as these liquidations continue.
Investors are waiting for the FOMC
So what exactly triggered this cryptocurrency winter? Although the reasons are multifaceted, two main factors stand out. First, Bitcoin’s poor performance can be attributed to reduced inflows into Bitcoin ETFs (Exchange Traded Funds). These investment vehicles allow traditional investors to invest in Bitcoin without directly owning it. Low inflows indicate reduced institutional interest, which reduces market sentiment.
Second, the Fed’s stance on interest rates has cast a shadow over the crypto market. Initially, investors were hopeful of a rate cut that would generally lead to increased risk-taking behavior and potentially benefit cryptocurrencies. However, it is thought that the FOMC meeting will prioritize reducing inflation rather than stimulating growth. This dashed hopes. This hawkish stance contributed to a calmer mood in the market.
MicroStrategy is buying
However, there are also glimmers of hope amidst this pessimism. Big players like MicroStrategy did not hesitate to accumulate Bitcoin during this decline. cryptokoin.com As we reported, just yesterday, they announced that they purchased an additional 9,245 Bitcoin. Thus, their total assets reached 1% of the total Bitcoin supply. This aggressive buying spree shows that some institutional investors remain confident in Bitcoin’s long-term prospects.
Looking ahead, all eyes are on the upcoming FOMC meeting. Although an immediate rate cut is unlikely, investors will listen carefully to the Fed’s comments on inflation and unemployment. Any indication of a dovish shift in the future is critical. Because it has the potential to reignite the bulls in the cryptocurrency market. However, if the Fed maintains its hawkish stance, the current correction risks prolonging further. Therefore, there is a risk that it will force investors to prepare for a longer crypto winter.
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