Breaking: Bitcoin price crash liquidates $310 million positions ahead of US CPI and interest rate decision
- Bitcoin price saw a sudden selling pressure early in the Asian session on December 11.
- This move comes after BTC set up a new yearly high at $44,700 on December 8.
- The sudden move to the downside has liquidated more than $200 million in positions according to data from CoinGlass.
Bitcoin (BTC) price dropped 7.74% in the early Asian session, briefly tagging the $40,400 level. According to data from CoinGlass, this move caused nearly $200 million worth of positions to be liquidated. With the US Consumer Price Index (CPI) and Fed's interest rate decision set to take place this week, volatility is likely going to remain high.
BTC/USDT 1-day chart
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Interest rates FAQs
What are interest rates?
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
How do interest rates impact currencies?
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
How do interest rates influence the price of Gold?
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
What is the Fed Funds rate?
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
Bitcoin whiplash catches greedy bulls
Bitcoin price briefly touched the $40,400 mark after shedding nearly 7.74%. The fresh start to the week was met with massive selling from Asian traders, which caused nearly $197 million in longs and $8.23 million in shorts to be liquidated.
Crypto liquidations
This drop also wiped $1.2 billion in open interest, which currently sits at $17.50 billion.
BTC Open Interest
Also read: Fidelity meets SEC for product discussions, submits “Bitcoin ETF Workflows” presentation
What this crash means for Bitcoin price
Bitcoin price currently trades around $42,289, which is the midpoint of the 77% crash BTC witnessed during the bear market crash. This mean level is pivotal and is bound to trigger massive take-profits or sell orders that cause market-wide liquidations. BTC might consolidate here as the struggle between the bulls and bears intensifies. Comparing the price action of the last two cycles, there is no threat of a major bull market correction for Bitcoin price until it tags the 62% retracement level of $48,733. However, investors need to be cautious of today's moves, which might catch many greedy investors off-guard.
The ideal place for market-wide profit-taking to occur will be the $50,000 psychological level.
BTC/USDT 1-week chart
Read more: Bitcoin Weekly Forecast: BTC uptrend capped by supply barrier at $43,860 as FOMO fails to suffice
Author
Akash Girimath
FXStreet
Akash Girimath is a Mechanical Engineer interested in the chaos of the financial markets. Trying to make sense of this convoluted yet fascinating space, he switched his engineering job to become a crypto reporter and analyst.
