Bitcoin Inches Towards $28K as Traders See $260M in Futures Liquidations
Bitcoin gradually moved to just below $28,000 on Thursday as traders digested Wednesday’s quarter-point interest rate hike by the US Federal Open Market Committee (FOMC), in line with expectations.
The decision reinforced the Federal Reserve’s concerns that inflation remains problematic and that it remains “strongly committed to returning inflation to our 2% target.”
Bitcoin fell below $27,000 immediately after the FOMC as traders took profits on a 20% gain over a seven-day rolling period. But traders of bitcoin-tracked futures took on more than $150 million in losses amid the volatility, with billions in open interest — or the number of outstanding contracts — effectively washed out.
Over 75% of those losses came from longs, or bets on price increases, as traders likely positioned themselves for a move higher after the FOMC meeting but were caught offside.
Ether rallied below $1,600, recovering in Asian hours on Thursday with a gradual move to the $1,700 mark. Its futures saw over $50 million in losses, contributing to over $280 million in total crypto futures liquidations.
Liquidation refers to when an exchange forcefully closes a trader’s leveraged position due to a partial or total loss of the trader’s initial margin. It occurs when a trader is unable to meet the margin requirements for a leveraged position (does not have sufficient funds to keep the trade open).
Large liquidations can signal the local top or bottom of a steep price movement, which can allow traders to position accordingly.
Other major tokens, such as XRP, fell 8% as traders took profits on a surge earlier this week amid positive sentiment for a favorable outcome in the ongoing Ripple v. SEC case.
Meanwhile, bitcoin prices have since recovered as some remain optimistic about the asset’s medium-term strength, stemming from a potential injection of money into US capital markets.
“Bitcoin continues to gain momentum amid the banking crisis, showing that investors recognize bitcoin as a safe store of value and a stable alternative to traditional finance,” Alex Adelman, CEO of bitcoin rewards app Lolli, said in a note to CoinDesk.
“The announcement of a $300 billion injection into the economy to save cash-strapped banks has also driven bitcoin’s price higher. The intervention, called a bailout, highlights that the traditional banking system is showing cracks,” Adelman added.
Elsewhere, FxPro market analyst Alex Kuptsikevich told CoinDesk that bitcoin’s price action in the coming days could serve as a signal of where bitcoin could go in the coming months.
“From a tactical perspective, a break above $28.5,000 could have a dam-breaking effect and quickly take the price to $30,000,” Kuptsikevich said, adding that the reaction of all markets to the FOMC move this week could be decisive as ” the range of expectations is incredibly broad.”
The $27,000 resistance zone for bitcoin remains a key level to watch, according to Kuptsikevich. “A break below $27.5K would nullify the bullish technical signal and open the way for a deeper correction,” he warned.