Crypto crash triggers $1 billion in leveraged liquidations over past 24 hours

Key Takeaways

Turmoil gripped the crypto markets after the Fed's surprisingly hawkish message following its rate cut decision.
Despite the crash, Bitcoin has gained 130% this year, while investors continue to accumulate.

Leveraged liquidity across crypto assets rose to $1 billion after a brutal selloff sent Bitcoin below $96,000 on Thursday, according to Coinglass. data.

Long positions accounted for most of the losses at about $878 million, compared to $160 million for short positions.

Bitcoin bounced back above $97,000 at press time but remains below $102,000 all-time high, CoinGecko data presentations.

It wasn't just Bitcoin; most crypto assets also declined in value. The total crypto market cap fell 9.5% to $3.4 trillion at the time of the report.

Ether lost 8%, Ripple lost 5%, and Solana and Dogecoin suffered even steeper double-digit losses over the past 24 hours. Smaller-cap assets were hit particularly hard, with only Move (MOVE) paring its losses.

Fed's hawkish stance

Markets appear to have reacted to the Fed's hawkish messages following the rate cut decision. The Fed on Wednesday delivered a 25-basis-point rate cut, but signaled fewer cuts in 2025.

Uncertainty in the economy, especially with the incoming administration, made the central bank take a more cautious stance. Fed Chairman Jerome Powell said it makes sense to “slow down” when the economic outlook is unclear.

Inflation has cooled from a peak of around 9% in June 2022, but remains firmly above the Fed's target. Lowering interest rates can stimulate economic growth by making borrowing cheaper, but it can also contribute to higher inflation.

Wall Street is concerned that Trump's proposed economic policies, including tariffs, could worsen inflation, although they could boost economic growth in the short term.

Bitcoin ETF Performance

Elsewhere in the Bitcoin ETF market, emerging indicators suggest a possible shift in sentiment.

While the US spot Bitcoin ETF has maintained a 14-day positive inflow streak, recent net inflows have been disproportionately limited within BlackRock's IBIT. Other ETFs have reported either zero net inflows or net outflows.

Data shows that Grayscale's low-cost Bitcoin ETF shed about $188 million on Thursday, its lowest since its launch, while the Grayscale Bitcoin Trust saw about $88 million in net outflows.

More data to be released later today will provide a more complete assessment of ETF performance.

A healthy fix?

Despite the sale, Bitcoin has gained about 130% this year. MicroStrategy, which has almost 2% of the supply of Bitcoin, continues its acquisition strategy. The company has bought $3 billion worth of Bitcoin so far this month.

Many crypto traders see the recent pullback as a healthy correction.

“It's the same story every time, and it never changes. Markets are not designed to win the majority. Corrections are a natural part of bull markets,” popular analyst 'Titan of Crypto' said.

The Crypto Index Fear and Greedwhich measures the emotional state of the crypto market, currently sitting at 75, indicating a sense of greed among crypto investors despite recent market volatility and price corrections.