Blame Fed and Leveraged Traders For This Seloff Crypto

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Source: Adobe / Xiongmao

Markets ranging from global tech stocks to crypto have been hit hard in the past day, after a report from the latest US Federal Reserve (Fed) meeting revealed a more hawkish stance than the market planned.

As of 10:09 a.m. UTC, bitcoin (BTC) was trading at $ 42,738, down 9% in the past 24 hours, while Ethereum (ETH) was trading at $ 3,334, down 13% over the same period.

7-day BTC price:

Source: CoinGecko

ETH price over 7 days:

Source: CoinGecko

The drop in cryptoassets came as US stock markets also fell, with the highly technical Nasdaq index falling 3.12% for the day Wednesday. At the same time, the broad S&P 500 index ended the day down 1.94%, its biggest one-day decline since a massive sell-off on December 1.

On Thursday morning (10:09 a.m. UTC), some stock indexes were already recovering, with for example the Hong Kong Hang Seng Tech index up 1.37% and US S&P 500 futures almost unchanged for the daytime.

The big moves in the markets came after minutes from the last Fed meeting on December 14 and 15 showed the central bank discussed tightening monetary policy and rate hikes in an effort to combat l ‘inflation.

Explaining why the minutes led to such a strong decision, Mike Loewengart, managing director of investment strategy at E * Trade Financial, told Bloomberg that the minutes revealed “a Fed more hawkish than some ‘might have expected “.

Commenting on the sharp drop in crypto in particular, Matt Dibb, COO of Singapore-based crypto fund distributor, Stack Funds, told Reuters today that the drop “correlated with the move to” reduce risk. “in most traditional asset classes,” while stressing that a drop in the Nasdaq index is particularly significant.

As usual with massive sell-offs in the crypto market, significant sell-offs followed. According to data from Coinglass, more than $ 424 million in long trading positions were liquidated in the crypto market during the four hours between 8:00 p.m. yesterday and midnight UTC. Of this amount, $ 177.6 million in long positions was liquidated in bitcoin alone.

The deleveraging over the past 24 hours followed warnings from analysts at Arcane Research as recently as this week that increased leverage combined with low volatility means the market “looks ripe for a break. movement “in both directions.

Commenting on the crypto sale, FTX CEO Sam Bankman-Fried said he does not view the move as specific to crypto. “Everything is down today; stocks are probably at the top of crypto, ”said the CEO of the exchange.

3) TO BE CLEAR, I AM NOT SAYING WE ARE IN A BEAR MARKET, BEAR MARKETS ARE MYTHS SPREAD BY FIRES, MARKETS ARE EFFICIENT MACHINES SOMETIMES

but more generally, going down today does not mean going down tomorrow

– SBF (@SBF_FTX) January 6, 2022

On a similar note, Zhu Su, CEO of crypto hedge fund Three Arrows Capital, also attributed the crypto sale to a move that has started in the stock market. “Tech stocks have fallen the most in 10 years, I can’t control that,” the popular crypto investor said when faced with an earlier prediction that the bottom was already reached for crypto.

Meanwhile, the market crash also came at a time when some in the crypto community feared that selling pressure from Asia would push the market down. The sale is believed to have been caused – at least in part – by Chinese traders being forced to withdraw funds from certain crypto exchanges and peer-to-peer markets before the December 31 deadline.

With 2021 now behind us, data shared by bitcoin analyst at mining company Blockware Solutions, Will Clemente, showed Asian office hour sales have already declined significantly.

The data was confirmed by another analyst, who said the selling pressure over the past month was mostly seen during working hours in the United States and Europe.

“For the past few weeks we have been clearly in a downtrend and there is no sign of a decisive reversal in sight. However, striking similarities between the current price development and market movements between mid-May and August provides reason for cautious medium-term optimism, ”said Mikkel Morch, executive director and risk management of crypto / digital asset hedge fund ARK36, in an emailed comment.

According to him, a rebound to around 47,000 USD per BTC in the coming days could corroborate this thesis while further losses would largely invalidate it.

“Either way, only a clear break above $ 50,000 would signal a major trend reversal and investors should keep in mind the inherently volatile nature of the digital asset market,” Morch said.

Also on a positive note, independent crypto researcher Mira Christanto said the latest sell-off does not mean crypto will be in a bear market in 2022.

“The market has now incorporated the fact that the Fed is reducing the size of its balance sheet. Bullish if there is easing, bearish if there is further tightening, ”she said.

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___ Read more: – Bitcoin could reach 100,000 USD in five years if it takes gold – Goldman Sachs – 100,000 USD per Bitcoin ‘Hopium’ now moved to mid-2022

– How the global economy could affect Bitcoin, Ethereum and Crypto in 2022 – Bitcoin and Ethereum price predictions for 2022___ (Updated at 10:52 UTC with a tweet from Alex Krüger. Updated at 13:02 UTC with comments from Mikkel Morch. Updated at 13:41 UTC with feedback.)

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