The announcement of the Fed’s interest rate decision has put the cryptocurrency market under significant downward pressure. Bitcoin (BTC) and the largest altcoin, Ethereum (ETH), saw their prices drop by 6% and 8% respectively in the last 24 hours. While BTC tested the $61,000 support level, ETH fell to $3,000, signaling a deeper correction in the altcoin market during a period when investors were expecting a potential recovery.
$670 Million in Major Liquidations
According to data from crypto data provider Coinglass, there were approximately $670 million in liquidations in the last 24 hours. This liquidation was one of the most significant seen in the past two weeks. About $500 million of these liquidations were long positions, while short positions totaled $170 million. This occurred as the broader cryptocurrency market experienced a surprising loss of about $600 billion since reaching a peak of $2.9 trillion last week, with altcoins like ETH, BNB (BNB), and Dogecoin (DOGE) falling sharply.
Analysts at K33 Research warned that long positions in the derivatives market might not have been fully liquidated yet, which could prevent a swift recovery in the cryptocurrency market. Anders Helseth and Vetle Lunde from K33 Research emphasized the continued risk of increased downward volatility due to long liquidations and highlighted the challenging path ahead for investors.
Decline in Spot ETF Inflows and the Fed Interest Rate Decision
On the other hand, Bitcoin is trading near its lowest level in about two weeks, affected by the decline in inflows into spot Bitcoin ETFs in the US. Additionally, concerns over the decreasing likelihood of a rate cut in the US have contributed to the reduced market sentiment surrounding the largest cryptocurrency and altcoins. Despite these challenges, significant market players continue to accumulate Bitcoin during downturns.
The largest institutional Bitcoin investor, MicroStrategy, announced on March 19th that it had further strengthened its position in the cryptocurrency market by purchasing an additional 9,245 BTC between March 11-18, 2024. With this latest purchase, the company now holds 1% of the total BTC supply, demonstrating its confidence in Bitcoin’s long-term potential despite short-term market fluctuations.
In addition, the Fed’s upcoming interest rate decision is expected to focus on permanent inflation rates and unemployment figures, avoiding an emergency rate cut. Interest rates are expected to remain at the highest level in twenty years, between 5.25% and 5.5%, even in July. Investors’ attention will be on the press conference to be held by Chairman Jerome Powell following the announcement of the interest rate decision and economic forecasts.
