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Bitcoin (BTC) Price Drop to $66,000 Triggers $250 Million Crypto Liquidations for FOMC Traders, CPI Report
Cryptocurrencies fell further on Tuesday in the correction with bitcoin (BTC) falling to nearly $66,000 as traders prepare for Wednesday’s key U.S. inflation report and Federal Reserve meeting.
Bitcoin (BTC) it started the day trading near $70,000 before hitting a three-week low of $66,170 during the American session. It rebounded slightly to nearly $66,500, but was still down nearly 5% over the past 24 hours.
Over the same period, altcoins have seen even deeper retreats, with the CoinDesk 20 index, the benchmark of the cryptocurrency market, falling by more than 6%, with all twenty components in the red. The Ethereum ether (ETH) fell below $3,500 and fell 6.5%, while solana (SOL)dogemoneta (DOGE)Cardano ADA and Chainlink CONNECTION suffered losses of 6%-9%.
The sudden retreat resulted in over $250 million in liquidations of leveraged derivatives trading positions across all crypto assets, CoinGlass data show, marking the second significant increase in leverage in a week following Friday’s $400 million liquidations.
Liquidations occur when an exchange closes a leveraged position due to a partial or total loss of the trader’s initial money, or “margin,” because the user fails to meet margin requirements or does not have sufficient funds to keep the position open.
One reason behind the pullback is that investors “de-risk” cryptocurrencies ahead of tomorrow’s May consumer price index (CPI) report and Fed meeting, hedge fund QCP said in a update.
Bitcoin could see a volatile session on Wednesday as it has been “highly responsive” to economic data recently and its 30-day correlation with U.S. stocks rose to its highest since 2022, K33 Research noted in a market update on Tuesday.
“The stage is set for a busy macro Wednesday, with May CPI data and the Fed’s interest rate decision poised to move the market,” K33 analysts said.
Investors will be monitoring the interest rate outlook of members of the Federal Open Market Committee (FOMC) – the so-called “dot plot” – to see how many rate cuts policymakers are predicting this year in light of recent inflation data and weaker economic data.
“The FOMC dot plot, along with the forward guidance provided during Jerome Powell’s press conference, will likely be the most material price mover as BTC resumes its focus on the market’s interest rate expectations. “
Market watchers noticed some positive signs during the sell-off that could indicate a quick recovery.
Bitcoin experienced numerous pullbacks this year ahead of FOMC meetings, only to reverse the trend soon after, pseudonymous cryptoanalyst Gumshoe pointed out in an article X post.
Open interest of Bitcoin futures on cryptocurrency exchanges BitMEX and Binance diverged today, crypto analytics platform CryptoQuant published citing pseudonymous trader BQYoutube. “Often this type of phenomenon is observed when whales [on] BitMEX begins to accumulate positions as Binance retail is canceled,” he explained send added.
“Despite the near-term headwinds, we believe this could be a good opportunity to accumulate money,” QCP said.