Aug 4, 2024

6thTrade

Bitcoin has recently plummeted below the $61,000 mark, leading to the liquidation of over $260 million in long positions. This sharp decline is attributed to a confluence of factors affecting the broader financial landscape.

A significant factor is the recent increase in the US unemployment rate to 4.3%, which has spooked investors. A higher unemployment rate often signals a weakening economy, potentially edging towards a recession, causing investors to shy away from riskier assets like cryptocurrencies

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Additionally, the Bank of Japan’s decision to raise interest rates for the first time in 17 years has further exacerbated the situation. Previously, borrowing yen was nearly free, making it an attractive funding currency. With the new interest rates, investors are now pulling funds from US equities and other high-risk assets to capitalize on the stronger Japanese yen

Geopolitical tensions have also played a crucial role, with recurrent fears of World War III pushing investors towards safer assets. During such times of uncertainty, investments in volatile assets like cryptocurrencies typically decline【7†source】

The market is also reacting to the ongoing distributions of Bitcoin from the Mt. Gox settlement and the Genesis distribution. Mt. Gox’s recent announcement to start repaying creditors with $9.4 billion worth of Bitcoin has led to fears of a significant sell-off, further driving down Bitcoin’s price

In response to these factors, Bitcoin saw over $122 million in long positions liquidated within 24 hours, part of nearly $300 million in total crypto liquidations. This significant sell-off has pushed Bitcoin into oversold territory according to the Relative Strength Index (RSI), indicating potential for a short-term recovery, though the market remains highly volatile

Other cryptocurrencies have also been impacted. Ethereum (ETH), the second-largest cryptocurrency by market cap, experienced a 5% drop and saw nearly $60 million in long positions liquidated. Bitcoin Cash (BCH), part of the Mt. Gox repayment plan, suffered a 9% drop in the past 24 hours and has fallen nearly 30% over the past month

In summary, Bitcoin’s decline below $61,000 reflects complex global financial dynamics and market reactions to economic and geopolitical events. Investors and analysts continue to monitor these developments to anticipate future market movements.

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