Bitcoin sharply shed 5% on Tuesday, wiping out more than $165 million in losses for leveraged traders and deepening the pain of the pounded cryptocurrency market after the dollar strengthened and upbeat U.S. factory data was reported.
The crash sent Bitcoin tumbling from $69,450 to $65,970 in under 30 minutes, which is enough to power net liquidations above $165 million given the tremendous involvement of leveraged positions in both Bitcoin and Ethereum. Heavy liquidations of longs also happened in Dogecoin and Solana, indicating wider market instability.
Meanwhile, Tether, an American dollar-pegged stablecoin, briefly wobbled from its usual $1 peg as far as $0.988. For this, it further fed into the volatility of this market with unknown reasons within this crypto downtrend.
This market turmoil came on the same day upbeat US factory data was released, which showed expansion in March. The manufacturing PMI by the Institute for Supply Management surged to 50.3, signaling growth for the first time since September 2022 and beating expectations. The surprise bounce ended expectations of Fed rate cuts-the dollar index burst above 105 for the first time since mid-November.
Bitcoin fell below $66,500 during Asian hours, as the strong dollar depressed appetite for dollar-denominated assets like cryptocurrencies. The broader cryptocurrency market was also deep in the red, with Ethereum, Solana, and Dogecoin posting heavy losses as investors remained concerned by what the stronger dollar could do to dollar-denominated asset valuations.
Still, some analysts remain optimistic about Bitcoin because they put together the long-term tailwinds caused by fast Fed rate cuts amidst ballooning fiscal debt. This week, it again has a set of key economic reports in store, which includes non-farm payrolls and the unemployment rate. Hence, Bitcoin's near-term volatility could prevail accordingly.
Since there is uncertainty in economics and rules are still in the works, the pricing of cryptocurrencies should remain quite volatile. This only underlines the risk management approach that becomes necessary within this ever-evolving crypto landscape.
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