Bitcoin Had A Brief But Sharp Dip to $40,400, $400 Million On Market Liquidated

As we count down to the Bitcoin halving event each day, the price of Bitcoin has been consistently going upwards, albeit with some hiccups. However, on early December 11, an unexpected surge in selling occurred, catching the market off guard. What caused this sudden and significant change? Let's explore some possible reasons behind this unexpected shift.

"Why would it dip???": An Alert for Greedy Investors

Perhaps this is currently one of the most frequently asked questions. Just a few days ago, Bitcoin's price shot up to over US$44,000 because of a strong uptrend, possibly boosted by news that BlackRock was making moves for a Bitcoin ETF.

However, things changed on the morning of December 11, 2023. Bitcoin suddenly fell from US$42,000 to US$40,400, then quickly bounced back to US$42,190 when this article was written.

Despite the rebound, the exceptionally turbulent period led to a substantial loss of leveraged positions, resulting in the liquidation of positions totaling nearly US$409 million. In particular, Bitcoin alone contributed US$104 million, comprising US$90.72 million in long positions and US$13.33 million in short positions, as reported by CoinGlass.

This turbulence affected more than 119,000 traders (Source: https://www.coinglass.com/LiquidationData)

The Affected Cryptocurrencies

The sudden drop in Bitcoin and its quick bounce back had a ripple effect on other altcoins. Alongside Bitcoin, four other tokens—ETH, SOL, XRP, and DOGE—went through significant liquidation. Of these, ETH saw the highest liquidation at US$82 million, followed by US$23.44 million for SOL.

Source: https://www.coinglass.com/LiquidationData

As of now, this recent crash in the crypto market may not have a direct explanation, but it can be mainly attributed to 3 possibilities:

Upcoming US Inflation Data and Federal Reserve Decision

This week, the Federal Reserve will announce inflation data in the United States and make its final decision on policies for the year, with the probability of the Federal Reserve cutting interest rates next year being reduced. No matter the outcome, these announcements that are scheduled for Wednesday could affect aggressive bets that people have made on interest rate cuts.

Interestingly, the price of Bitcoin was still considered "stable" a few days back when the unemployment rate was announced for November. The rate went down to 3.7%, which is an improvement from the 3.9% reported in October (Based on information from the Bureau of Labor Statistics).

Market Deleveraging

According to Richard Galvin, co-founder of Digital Asset Capital Management, the market downturn might not be tied to any specific news but could result from market deleveraging, since market leverage had risen materially.

Bitcoin Chicago Mercantile Exchange (CME) Futures Gap

A few days ago, analyst Willy Woo suggested that there's a gap in the Bitcoin Chicago Mercantile Exchange (CME) futures market that needs to be filled. As CME futures don't trade continuously, this leads to differences between closing and opening prices based on Bitcoin's price movement when the market is closed.

With this volatility, Willy Woo speculates that Bitcoin's price might fluctuate between the price levels of US$39,000 and US$41,000.

Source: X

Keep Your Fingertips On The Heat of the News

In this unpredictable market, it's important to be careful regarding information and predictions from the media and influential figures. The price of assets can be influenced by various factors, and it's crucial to recognize that it might not always reflect the true trends of the market. Hence, it's essential for you to do thorough research before making any investment decisions.

Whether you're considering taking advantage of a Bitcoin price dip or simply keeping an eye on the current market situation, Bitget Academy is dedicated to providing you with more detailed information and the latest news. Explore the other trending news we have for you:

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Disclaimer: The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. Qualified professionals should be consulted prior to making financial decisions.