Bitcoin Plunges to $56,556, Marking Sharpest Monthly Tumble Since November 2022

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In what can be described as a stunning turn of events, Bitcoin stumbled significantly on Wednesday, dropping to a low of $56,556 in the early European trading hours. A plunge as profound as this hasn’t been seen for the world’s most widely traded cryptocurrency since late February. The roughly 7.5% drop — the sharpest monthly tumble since November 2022 — occurred within a 24-hour trading period and burst the previously invincible $60,000 benchmark late Tuesday night.

As Bitcoin made its descent, a thick air of anticipation punctuated with pronounced anxiety filled financial spheres. This much-awaited Federal Open Market Committee interest rate determination has been a pivotal event precisely because the cryptocurrency market, with Bitcoin in particular, has demonstrated a heightened sensitivity to global economic cues.

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In retrospect, a steady decline in Gross Domestic Product (GDP) amalgamated with persistent inflationary trends had considerably downgraded prospects of Federal Reserve-driven interest rate cuts. As Ted from TalkingMacro noted, “Bitcoin, as well as other risk-imbued assets, are currently grappling with pressures from a stagflation-prone environment, geopolitical fluctuations and cyclical liquidity mutations.”

Initially, markets had factored in up to seven rate cuts by the end of 2024. This optimism, however, has since waned substantially; a mere single cut is now anticipated by December 2024. This shift in sentiment comes against the backdrop of continuous inflationary pressures that challenge the Fed’s stance and hint at a more cautious approach going forward from Jerome Powell, the Federal Reserve Chairman. As Ted observed, “The market, for the first time in recent memory, is questioning the Fed’s approach.”

Following an unprecedented rally since the onset of the year, the market has now entered a natural correction phase. Capriole Investments’ Founder, Charles Edwards, spoke of this market performance reminding us, “We are on the cusp of breaking the 2011 record set for days without a substantial dip of 25%,” emphasizing the exceptional trajectory of Bitcoin’s performance.

Scott Melker, the cryptocurrency analyst known as “The Wolf Of All Streets,” pointed towards technical indicators that suggested a looming correction. “Broke and retested range lows as resistance […] a significant correction is yet to be seen during this bull market,” he observed.

Meanwhile, mainstream finance circles and seasoned investors are capitalizing on this new panorama to realize profits after considerable gains. RunnerXBT, a crypto-market analyst, pointed out the marked downward trend in CME Open Interest, eliciting the adoption of profit-taking strategies in the aftermath of significant events such as the ETF approval and Bitcoin’s halving.

Furthermore, the landscape surrounding Bitcoin exchange-traded funds (ETFs) reflected notable tensions and strains. In the United States, Bitcoin ETFs experienced substantial outflows indicating a dampening of investor sentiment. Meanwhile, Hong Kong’s newly launched Bitcoin ETFs massively underperformed, amassing a mere $11 million in trading volume against the anticipated $100 million figure.

Finally, considerable long liquidations added salt to the wound. Over the past 24 hours, a staggering $451.28 million was liquidated amplifying the selling pressure on Bitcoin significantly.

By the time this report wraps up, Bitcoin was trading at $57,715. Yet with recent events as proof, the only certain thing about the cryptocurrency market is its inherent uncertainty.