In the evening hours yesterday, Bitcoin had a steep decline with its price sliding to roughly $68,000. Investors were concerned because everything looked good but then this sudden decline happened. Therefore what caused it?
Why is Bitcoin Falling?
The reason Bitcoin’s price dropped recently was because of better-than-expected non-farm payroll data print in the USA. The statistics showed that about 272000 jobs were added in last month instead of the anticipated 182000; this information was made public at 3:30 pm. The significant outperformance of this figure quashed hopes for an interest rate cut by the Fed next month, thus strengthening the USD instead. Moreover, markets now price in a 45% chance of a rate cut in September, down from 56% before the employment data was released.
The surge in job numbers created a cloud of doubt among investors, leaving them uncertain about the possibility of seeing interest rates dropping imminently. This change in feeling however saw the value of the dollar increase leading to a fall in the worth of Bitcoin. Nonetheless, one cannot neglect the bigger picture when it comes to these employment statistics. If the Fed were to utilize them then there’d be less probability that it may slash borrowing costs within some months thereby causing a rise in bond yields which would affect investment opportunities by savers.
The Impact of Roaring Kitty’s Livestream on the Market
On the contrary, following a YouTube livestream hosted by the GameStop phenomenon known as Roaring Kitty, some cryptocurrency sales picked up. A lot more than six hundred thousand viewers participated in this session hoping for some breaking news. Yet Roaring Kitty made no such announcements thus causing a sharp decline in GameStop’s shares which had gone down by more than forty percent. Consequently, GME- another name used to refer to meme cryptocurrency plunged even deeper than that at a rate below fifty percent while others also fell into double digits, as with most meme coins.
The investors began to panic and started panic selling due to the news delay. They expected big news but it never came so there was a general reaction from all quarters. As a result, there were massive drops across different meme coins that worsened the market slump in general.
Consequences of the Bitcoin Drop
Finally, Bitcoin fell and liquidated $400 million worth of leveraged positions. Coinglass reports that close to 150,000 users lost their money in the derivatives market. There are many people in this category making it very risky with high leverage hence making it very volatile however.
The wave of this liquidating is a thing that happens naturally because of betting so many coins on the margins. These things normally happen so that if the value of Bitcoin drops significantly, those who had margin calls end up losing a lot making prices go down much more. When all this happens, consequently, the chain gets stronger and stronger leading markets to become even more volatile than they would have been without it, and in the end destabilizing further costs.
Generally speaking, Bitcoin and altcoin prices dropped significantly due to combined disappointingly poor economic data, investor expectations failures from a much-talked-about major live streaming event, and extensive leveraged positions. The situation seen in this case illustrates how sensitive cryptocurrency markets are toward outside economic indicators and changes in market sentiment concerning them.
