Bitcoin Inches Toward $28K as Traders See $260M in Futures Liquidations
Bitcoin gradually moved to just under $28,000 on Thursday as traders digested the quarter-point interest rate raise Wednesday by U.S. 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% objective.”
Bitcoin slid under $27,000 immediately after FOMC as traders took profits on a 20% gain over a seven-day rolling period. However, traders of bitcoin-tracked futures took on over $150 million in losses amid the volatility, with billions in open interest – or the number of unsettled contracts – effectively getting washed out.
Over 75% of those losses came from longs, or bets on price rises, as traders likely positioned for a move higher after the FOMC meeting but were caught offside.
Ether slid under $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 overall 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 happens when a trader is unable to meet the margin requirements for a leveraged position (fails to have sufficient funds to keep the trade open).
Large liquidations can signal the local top or bottom of a steep price move, which may allow traders to position themselves accordingly.
Other major tokens, such as XRP, fell 8% as traders took profits on a rise earlier this week amid positive sentiment for a favorable result in the ongoing Ripple v. SEC case.
Meanwhile, bitcoin prices have since recovered as some remain optimistic about the asset’s strength in the medium term, stemming from a potential money injection into U.S. capital markets.
“Bitcoin is continuing to gain momentum amid the banking crisis, showing that investors are recognizing bitcoin as a secure store of value and a stable alternative to traditional finance,” said Alex Adelman, CEO of bitcoin rewards app Lolli, 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 up. The intervention, which is being called a bailout, highlights that the traditional banking system is showing cracks,” Adelman added.
Elsewhere, FxPro markets analyst Alex Kuptsikevich told CoinDesk that the price action of bitcoin in the coming days could serve as a signal of where bitcoin may head in the coming months.
“From a tactical perspective, a break above $28.5K could have a dam-breaking effect and quickly take the price to $30K,” Kuptsikevich said, adding that the reaction of all markets to the FOMC move in this week could be vital as “the range of expectations is incredibly wide.”
The $27,000 resistance zone for bitcoin remains a key level to watch, as per Kuptsikevich. “A break below $27.5K would negate the bullish technical signal and open the way for a deeper correction,” he cautioned.