Bitcoin After Thursday’s moderate inflation report suggested a recovery, chaos erupted again, prompting more than $500 million in crypto liquidations.
The outlook for the crypto market appeared to be bullish, with headline and core inflation rates at 2.7% and 2.6%, respectively, lower than the expected 3%. Bitcoin came close to revisiting $90,000, but sellers went on the offensive again, erasing the gains in a matter of hours.
According to data from CoinGlass, the crypto market saw $575 million in liquidations in the past 24 hours, of which $368 million were long positions. Of the liquidated positions, Bitcoin accounted for $202 million, of which $119 million of long positions were liquidated.
Unlike Wednesday’s whipsaw, where spot investors pushed prices lower, the recent reversal was also caused by profit-taking by derivatives investors, according to Velo data.
Despite the washout, the $85,000 to $81,000 range remains a good source of demand. Bitcoin has risen nearly 1% in the past 24 hours and is currently trading at around $88,100, according to data from CoinGecko.
Trader and owner of prediction market Myriad decryption’s parent company Dastan remains optimistic, pegging a 61% chance that Bitcoin’s next move will be $100,000 instead of $69,000.
Pressure on yen carry trade
The Bank of Japan hiked interest rates by a quarter of a point on Friday, ending a 30-year low interest rate regime, potentially putting more pressure on cryptocurrencies and other risk assets, according to previous reports. decryption Report.
This historic decision puts pressure on the carry trade that has been going on for decades. As a result, the unwinding of carry trades after rate hikes will halt the liquidity that has been flooding risk assets for years.
Whatever the catalyst, leverage in the cryptocurrency ecosystem remains high. Reflecting this, there were four days in December when the total liquidation amount in the virtual currency market exceeded $500 million.
According to Coinalyze, a closer look at the liquidation data shows that long positions by optimistic investors are contributing significantly to total liquidations.
As the holiday season approaches, volatility could increase as liquidity shrinks and investors rebalance their portfolios.
A decline in spot demand and a defensive posture among futures and options traders will likely exacerbate this situation.