The once-booming crypto market witnessed a dramatic downturn on Friday, March 15th, with Bitcoin (BTC) plunging 8% and wiping out its weekly gains. This freefall triggered a wider market decline, leading to a collective sigh of worry from crypto bulls.
One anonymous Bitcoin trader predicted a further slump, suggesting prices could sink as low as $60,000. This pessimistic outlook comes amidst a brutal liquidation event that saw over $650 million in crypto futures contracts forcefully closed.
The sell-off began during U.S. trading hours on Thursday, fueled by higher-than-expected inflation data. The February Producer Price Index (PPI) came in at a scorching 0.6%, exceeding January’s figure by a significant margin and shattering economist forecasts. This data dashed hopes of a potential interest rate cut in May, sending chills down the spines of risk-on assets like cryptocurrencies.
The domino effect was swift and unforgiving. Bitcoin, the world’s leading cryptocurrency, tumbled from a Thursday high of $73,000 to a precarious low of $65,800 on Friday before staging a slight recovery. This drop erased all the gains accrued over the previous week, leaving many investors nursing losses.
The pain wasn’t limited to Bitcoin. The Coindesk 20, a broad index encompassing the most liquid crypto tokens, mirrored Bitcoin’s woes, plummeting a staggering 8.25%. Major altcoins like Ethereum (ETH), Cardano’s ADA, and BNB Chain’s BNB all witnessed significant losses. Even meme coins, known for their volatility, weren’t spared. Dogecoin (DOGE) and Shiba Inu (SHIB) took a 13% haircut, highlighting the pervasiveness of the sell-off.
The bloodbath wasn’t solely driven by the inflation data. Analysts point to a significant role played by liquidations in leveraged positions. Crypto-tracked futures contracts suffered a staggering $800 million in losses, with the second-largest figure of these losses concentrated in “long” positions, or bets on rising prices. When the market went south, these leveraged positions were liquidated by exchanges to prevent further losses, further accelerating the downward spiral.
This recent downturn serves as a stark reminder of the inherent volatility of the cryptocurrency market. While Bitcoin has enjoyed a phenomenal bull run in recent years, such dramatic price swings highlight the importance of caution and risk management for investors. Whether the market rebounds or continues its descent remains to be seen, but one thing is certain: the next few days will be crucial in determining the crypto market’s short-term trajectory.
