Bitcoin's sudden 5% drawdown on Tuesday triggered over $165 million in losses for leverage traders, adding to market woes amidst strengthening dollar and positive US factory data.
The flash crash, plummeting Bitcoin from $69,450 to $65,970 in under 30 minutes, led to liquidations exceeding $165 million, primarily impacting leveraged positions in Bitcoin and Ethereum. Long positions in Dogecoin and Solana also faced significant liquidations, highlighting the broader market turmoil.
Simultaneously, the value of Tether, the US dollar-pegged stablecoin, experienced a brief wobble, dropping to $0.988 from its usual $1 peg. While the cause remains uncertain, this volatility added to the market's jitters amidst the crypto downturn.
The market turmoil coincided with upbeat US factory data released on Monday, showing unexpected expansion in March. The Institute for Supply Management's manufacturing purchasing manager's index (PMI) rose to 50.3, signaling growth for the first time since September 2022. This unexpected surge halted expectations of Fed rate cuts, causing the dollar index to soar above 105 for the first time since mid-November.
Bitcoin's price fell below $66,500 during Asian trading hours as the strengthening dollar dampened demand for dollar-denominated assets like cryptocurrencies. The broader crypto market, including Ethereum, Solana, and Dogecoin, witnessed significant losses, reflecting investor concerns over the impact of a stronger dollar on asset valuations.
Despite short-term volatility, some analysts remain bullish on Bitcoin, citing potential long-term tailwinds from rapid Fed rate cuts amidst ballooning fiscal debt. With several key economic reports lined up for the week, including nonfarm payrolls and unemployment rate figures, Bitcoin's volatility is likely to persist in the near term.
As the market navigates through uncertain economic conditions and regulatory developments, investors brace for continued volatility in cryptocurrency prices, emphasizing the need for risk management strategies in the ever-evolving crypto landscape.
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