Cryptocurrencies took a beating in the market, with Bitcoin experiencing a nearly 10% drop in just a few hours. The fallout was felt across the entire cryptocurrency market, with many other digital currencies losing more than 20% of their value. This marked the beginning of a bear market for cryptocurrencies – defined by price drops of 20% or more.
Bitcoin, the largest cryptocurrency by market capitalization, plummeted to around $57,000 USD, losing over 20% of its value compared to its all-time high of $73,000 in mid-March. Analysts attributed the selling pressure in the market to lack of attention towards spot ETFs in Hong Kong and investor concerns about interest rates. Other cryptocurrencies like Ethereum (ETH) and Solana (SOL) also witnessed significant declines of 9-11%.
The decline in cryptocurrencies was not limited to Bitcoin alone as futures trading positions worth nearly $100 million were liquidated on exchanges in the past hour, totaling close to $500 million in liquidations over a 24-hour period. This occurs when the loss of trading orders surpasses the initial deposit amount due to the use of large-scale leverage in futures contract trading. Futures contracts have become increasingly popular among investors looking for higher returns on their investments, but they also come with higher risks as they are highly leveraged.
The decline in cryptocurrencies was closely mirrored by traditional markets as the Nasdaq index fell 2% and the S&P 500 lost 1.6% on the same day. Experts attributed this downward trend to expectations for higher interest rates by the US Federal Reserve due to persistent inflation, which is also leading to a stronger position for the USD. As inflation rises so does interest rates which makes borrowing more expensive and can slow down economic growth hence reducing demand for risky assets like crypto currency’s prices will decrease as people reduce their investments into them due to fear of loss of value while holding onto safer assets such as cash or bonds that provide better returns .
In April alone, Bitcoin lost nearly 18% of its value while Ethereum dropped around 19%. Altcoins such as SOL, Dogecoin (Doge), and AVAX are facing even deeper corrections of