The recent interest rate announcement by the US Federal Reserve has caused a surge in volatility within the Bitcoin market. Within a span of 24 hours, approximately $48 million was liquidated as a result of this announcement. As of press time on Friday, Bitcoin (BTC) was trading just below the $43,000 mark, after briefly reaching above that level during the high volatility trading sessions on Wednesday and Thursday.
Bitcoin’s Performance and Market Reaction
Bitcoin had reached its yearly high of $44,700 on December 8, and currently, the cryptocurrency is trading approximately 4.7% below that price. Over the past seven days, BTC has experienced a 3% decrease; however, it still maintains a positive growth of over 17% on a 30-day basis, according to data from CoinGecko.
While the market seems to have absorbed the Fed’s announcement to maintain steady interest rates, the initial market reaction resulted in significant liquidations of leveraged derivatives positions on both the long and short side.
The Impact of the Fed’s Announcement
On the day of the Federal Reserve’s announcement, there were $35.4 million worth of Bitcoin shorts liquidated as the price initially surged higher due to the Fed’s more dovish stance. However, bullish long positions were not spared either, as $12.56 million worth of longs were wiped out when BTC experienced a sudden drop shortly after. Overall, the day of the announcement saw approximately $48 million in leveraged positions being liquidated.
It is worth noting that these liquidations followed the largest long liquidation event in three months, which occurred on December 11. Within 24 hours, $126.74 million in longs were liquidated after a sudden crash in the spot price of Bitcoin, plummeting from $43,800 to just over $40,000 in a matter of hours.
