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A period of unusual calm in crypto markets ended abruptly as the notion of higher-for-longer interest rates sparked a selloff in risk assets like Bitcoin, leading to mass liquidations of bullish bets. The rout pushed Bitcoin from near $29,000 to as low as $25,314 in a 24-hour span before the biggest token recovered slightly in early European trading on Friday. More than $1 billion of positions were unwound in the selloff, according to Coinglass data.
Bitcoin remains 60% above where it started the year, handily beating other well-performing assets like technology stocks. But a multitude of headwinds — from rising bond yields to regulatory pressures and economic weakness in China — threaten to undermine the appeal of assets like cryptocurrencies.
Crypto traders are now focusing on the $25,000 level for Bitcoin, below which options positioning suggests another cascade of liquidations could hit. “With limited catalysts to push Bitcoin higher in the short term, a fall below $25,000 could put bears in charge, and if the rout in global risk assets continues, Bitcoin could face further downside,” said Josh Gilbert, market analyst at trading and investing firm eToro. A Wall Street Journal report citing documents that Elon Musk’s SpaceX has sold off its Bitcoin holdings after writing down $373 million also weighed on sentiment. It wasn’t clear from the Journal report when SpaceX had sold its Bitcoin.
While broader markets are seeing a pullback in the selling as the dollar weakened, the selloff in digital tokens amid thin liquidity continued unabated on Friday. The top 100 digital tokens gauge fell more than 5% at one point, outstripping a 0.2% decline in a regional stock index. Ether slipped 2% while Cardano and Solana fell 2.6% and 3.2%, respectively.
The largest single liquidation order happened on Binance, and was worth $55.92 million, Coinglass said in its website. The total amount of Bitcoin liquidations was the biggest for a single day since the market turmoil of June 2022, CoinDesk reported.
The $25,000 level for Bitcoin has the highest level of open interest among put options for August 25 expiry, according to data from Deribit. Should it drop below that level, sellers of those puts would be forced to liquidate or hedge their positions, putting further pressure on prices. The slide has almost erased the gains registered in the wake of BlackRock’s Inc’s surprise filing for a Bitcoin ETF on June 15. After surging 72% in the first quarter, Bitcoin has declined almost 7% since the end of March. The token tumbled 64% last year amid a series of bankruptcies. Some degree of optimism crept into the market after Bloomberg News reported that the US Securities and Exchange Commission is poised to allow the first exchange-traded funds based on Ether futures.