- Massive liquidations of leveraged positions, totaling $638 million over 24 hours, have contributed to Bitcoin’s extreme volatility in the past week.
- The launch of new Bitcoin ETFs, like BlackRock’s which now holds over $8 billion in Bitcoin, has provided a catalyst for Bitcoin’s surge back towards its all-time highs.
- Ongoing macroeconomic uncertainty and high inflation have driven more investors to see Bitcoin and crypto as an attractive hedge against the traditional financial system.
Bitcoin’s price has seen intense volatility over the past week, swinging wildly between $60,000 and $64,000. What’s behind these huge price moves? Here are three key factors driving the recent turbulence in the crypto markets:
Massive Liquidations Across Exchanges
The extreme volatility has liquidated hundreds of millions worth of leveraged positions on exchanges. According to Coinglass, traders saw $638 million in total liquidations over the past 24 hours. Of that, $391 million occurred in just the last 4 hours.
Bitcoin accounted for the largest chunk at $96 million. However, smaller altcoins saw even larger liquidations proportional to their market size, with $55 million liquidated from unspecified coins in the past hour alone. Ethereum and Dogecoin traders saw $45 million and $29 million liquidated respectively.
Launch of Bitcoin ETFs
Many point to the recent launches of several Bitcoin ETFs as a catalyst for Bitcoin’s surge towards its all-time highs again. BlackRock‘s BTC ETF now holds over $8 billion in Bitcoin, absorbing a record $520 million in inflows on Tuesday alone.
These regulated investment vehicles have opened the floodgates of institutional capital into Bitcoin and other cryptocurrencies, providing tailwinds for further growth.
Ongoing Macroeconomic Uncertainty
The larger macroeconomic backdrop remains uncertain, with high inflation and the potential for a global recession. In this environment, Bitcoin and other cryptocurrencies have become an attractive hedge against the traditional financial system for many investors.
Their fixed supply and decentralized nature offer an alternative to currencies like the U.S. dollar that can be devalued by central bank policies. This narrative will likely continue driving interest and volatility in the crypto sector.
Conclusion
Bitcoin’s famed volatility has been on full display this past week, driven by leveraged liquidations, new institutional products, and macro uncertainty. While unnerving for some, these price swings show that Bitcoin remains a nascent asset class still discovering its true price. As adoption increases, the long-term trajectory still points upward.
