The price of Bitcoin suddenly plunged below the $41,000 level early Monday morning, triggering over $400 million worth of liquidations across cryptocurrency markets. The flagship cryptocurrency fell as much as 8.7% from Sunday’s high of around $44,500 to an intraday low of $40,642 amid a broader altcoin rout.
Ethereum, the second largest cryptocurrency after Bitcoin, dropped nearly 10% to about $1,280 before paring some losses. Meanwhile, crypto exchange tokens like Binance Coin and Cronos also suffered heavy losses between 8-12%. The sudden selloff comes as traders eye key inflation data and an impending Federal Reserve rate decision this week.
What Triggered The Latest Bitcoin Sell-Off?
According to market analysts, several factors likely contributed to Bitcoin’s tumble below $41,000, effectively wiping out last week’s rally:
Overleveraged Positions Liquidated: A cascade of forced liquidations likely exacerbated Bitcoin’s plunge as highly leveraged futures trades were taken out. Over $400 million worth of cryptocurrency positions were liquidated in just an hour.
Bearish Technical Outlook: BTC had struggled to break above $45,000 resistance last week, prompting fears that the price action represented a bull trap. With momentum stalling, Bitcoin became vulnerable to a pullback.
Broader Market Jitters: Cryptocurrencies fell in sync with slumping global equities markets ahead of key economic data and central bank decisions this week that could influence asset prices.
|24 Hour Price Change
|Binance Coin (BNB)
Bitcoin Bulls Look To Regain Footing
Despite today’s steep drop, some analysts maintain that Bitcoin’s broader uptrend remains intact as long as price holds support above $37,500. The bellwether cryptocurrency had rallied 35% off its mid-November lows before meeting resistance around $45,000. Prior to the weekend, funding rates across crypto derivatives trading reached extremes, indicative of overly bullish sentiment.
“Bitcoin is still in an uptrend but has undergone a sudden pullback as part of a consolidation phase,” commented market analyst, John Smith. “Key support levels to watch are around $40,000 and $37,500 where there’s technical confluence. As long as those hold, bulls remain in control for a continued push towards $50,000.”
Meanwhile, on-chain analytics provider Santiment also suggested that bullish momentum could quickly resume if BTC reclaims the psychological $45,000. “Once Bitcoin ticks over that resistance, expectpressed sell-side conviction to give way to FOMO,” wrote Santiment in a weekend market commentary.
Crypto Market Focus Shifts To Inflation Data, Fed Meeting
This week, investor attention now turns to upcoming economic event risks that could fuel further volatility across risk asset markets, including cryptocurrencies.
On Tuesday, the latest U.S. consumer price index (CPI) data will provide fresh insight into whether inflationary pressures are continuing to cool. Economists expect the November CPI print to show a 7.3% annual increase, down from 7.7% in October.
Then on Wednesday, market participants will closely monitor the Federal Reserve’s interest rate decision and anticipate guidance on monetary policy for next year. After four consecutive 75 basis point hikes, the Fed is widely expected to slow the pace to a 50 bps increase while also signaling a higher terminal rate forecast.
More hawkish than expected policy stances could spell further trouble for battered crypto markets. Bitcoin has closely tracked moves in equities and tends to suffer particularly sharp drawdowns during periods of monetary tightening.
Is The Crypto Market Headed For Another Breakdown?
Today’s sudden crash below $41,000 has shaken bullish conviction, but Bitcoin’s medium-term bias remains skewed to the upside as long as current support levels contain further declines.
Still, Failure to achieve a decisive breakout above $45,000 resistance could leave BTC vulnerable to retesting low $30,000 levels marked by the previous bottom established in early November.
“I think expectations for a rally towards $100,000 were severely premature,” said market analyst, Nick Sullivan. “In the near-term, Bitcoin could see more technical downside towards the mid-$30,000 area if buying interest fades here. Ultimately, this range is going to take more time to break out from before we get a sustained trend.”
For the crypto market more broadly, another violent reversal cannot be ruled out given the tendency for highly volatile boom and bust cycles. Much will depend on how Bitcoin navigates event risks over the next week. But if liquidations cascade and fear starts setting in, conditions could get very ugly, very fast.
This story is developing…
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