Bitcoin dropped to just under $28,000 on Thursday after the U.S. Federal Open Market Committee (FOMC) raised interest rates by a quarter-point, in line with expectations. The decision reinforced the Federal Reserve’s commitment to returning inflation to its 2% objective. Bitcoin slid under $27,000 after the announcement as traders took profits on a 20% gain over the past seven days. However, traders of bitcoin-tracked futures suffered losses of over $150 million amid the volatility, with billions in open interest getting washed out.
Crypto traders experienced over $280 million in losses due to liquidations on Wednesday, with over 75% of those losses coming from longs. Ether, the second-largest cryptocurrency, slid under $1,600 before recovering in Asian hours on Thursday. Liquidation occurs when an exchange forcefully closes a trader’s leveraged position due to a partial or total loss of the trader’s initial margin, which happened when traders were unable to meet the margin requirements for a leveraged position.
A large liquidation of a major token, XRP, has caused a 8% drop in prices this week. This has been attributed to traders taking profits on a previous rise, as well as the ongoing Ripple v. SEC case. Despite this, Bitcoin prices have since recovered, with some remaining optimistic about its medium-term strength due to potential money injection into U.S. capital markets. This could be a sign of the local top or bottom of a steep price move, allowing traders to position themselves accordingly.
As the banking crisis continues, investors are increasingly turning to Bitcoin as a secure store of value and a stable alternative to traditional finance. This is evidenced by the recent surge in Bitcoin’s price following the announcement of a $300 billion injection into the economy to save cash-strapped banks. The intervention, which is being called a bailout, highlights the fragility of the traditional banking system and the growing appeal of Bitcoin as a safe haven asset. Alex Adelman, CEO of bitcoin rewards app Lolli, believes that this trend is likely to continue as more investors recognize the potential of Bitcoin.
Bitcoin is currently trading around the $28,000 mark, with analysts predicting a possible break above $28.5K that could take the price to $30K. The reaction of all markets to the FOMC move this week could be vital, as the range of expectations is wide. The $27,000 resistance zone for bitcoin remains a key level to watch, as a break below this could negate the bullish signal and open the way for a deeper correction. Analysts are keeping a close eye on the price action of bitcoin in the coming days, as this could provide an indication of where the cryptocurrency may head in the coming months.
