The crypto crash sparked $1 billion in leveraged liquidity in the past 24 hours.
Key receivers
Turmoil gripped crypto markets following the Fed's surprisingly dovish message after its rate cut decision. Despite the disaster, this year Bitcoin has gained 130%, investors continue to accumulate.
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Liquidity across crypto assets topped $1 billion following a brutal selloff that sent Bitcoin plunging below $96,000 on Thursday.
Long positions posted the largest losses at approximately $878 million, compared to $160 million for short positions.
Bitcoin has recovered above $97,000 at press time but remains below the daily high of $102,000, CoinGecko data shows.
It wasn't just Bitcoin; Most crypto assets have also dropped in value. The total value of the crypto market fell 9.5% to $3.4 trillion at the time of reporting.
Ether shed 8%, Ripple shed 5%, and Solana and Dogecoin experienced further double-digit losses over the past 24 hours. Low-coverage assets were hit particularly hard, with losses only matched by MOVE.
The Fed's hawkish stance
Markets are bound to react in turmoil to the Fed's unexpectedly hawkish message following the rate cut decision. The Fed cut rates by 25-basis-points on Wednesday, but indicated fewer cuts in 2025.
Uncertainty in the economy, especially with the incoming administration, prompted the central bank to take a more cautious stance. Fed Chairman Jerome Powell said that “tapering” is prudent when the economic outlook is unclear.
Inflation has cooled to around 9 percent in June 2022, but is still above the Fed's target. Lowering interest rates can stimulate economic growth by making credit cheaper, but it also contributes to higher inflation.
There is concern on Wall Street that Trump's proposed economic policies could worsen inflation, although they could boost economic growth in the short term.
Bitcoin ETF performance
Elsewhere in the Bitcoin ETF market, emerging indicators suggest a possible shift in sentiment.
Although US spot Bitcoin ETFs have maintained a 14-day streak of positive inflows, recent net inflows have been disproportionately concentrated in BlackRock IBIT. Other ETFs reported zero net inflows or net outflows.
Greyscale's low-cost Bitcoin ETF saw inflows of about $188 million on Thursday, a record low since its launch, while Greyscale's Bitcoin Trust saw net inflows of roughly $88 million, the data showed.
Additional data released later today will provide a more comprehensive assessment of the ETF's performance.
A healthy fix?
Despite the selloff, Bitcoin has gained roughly 130% this year. Microstrategy, which owns nearly 2% of Bitcoin's supply, continues its acquisition strategy. The firm has bought $3 billion worth of bitcoins so far this month.
Many crypto traders see the recent pullback as a healthy correction.
“It's the same story every time, and it never changes. Markets are not designed for the masses to win. Corrections are a natural part of bull markets,” noted analyst ‘Titan of Crypto'.
The Crypto Fear and Greed Index, which measures the sentiment of the crypto market, currently sits at 75, indicating a sense of greed among crypto investors despite recent market volatility and price corrections.
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