Bitcoin (BTC) has experienced its sharpest decline in nearly four months, as traders seek to secure profits after the cryptocurrency’s significant rally of over 150% this year.
On Monday, the leading cryptocurrency in market value fell by up to 7.5%, marking its largest intraday drop since August 18.
However, by 9:25 AM (Brasília time), the losses were reduced to around 3.3%, with Bitcoin trading at $42,335.
Other major cryptocurrencies also experienced declines. The top 100 digital asset index recorded its lowest point since November 22.
On Wednesday, Bitcoin approached the significant $44,000 mark, marking its longest streak of continuous gains since May.
Richard Galvin, co-founder of Sydney-based Digital Asset Capital Management, notes to Bloomberg Linea, “Market leverage has increased notably.”
He believes the current drop is more about market deleveraging than any fundamental catalyst.
Data from Coinglass reveals that about $312 million in crypto trading positions, betting on higher prices, were liquidated by December 11, 4:15 AM (Brasília time).
This amount is the largest since at least mid-September. Bitcoin has been in the spotlight this year.
Investors anticipate U.S. regulators will approve the first exchange-traded funds (ETFs) directly tied to the currency.
This move could broaden the investor base in cryptocurrencies.
Expectations that the Federal Reserve will cut interest rates in 2024 have also fueled the rally.
Investors are now focused on upcoming U.S. inflation data
Investors are now focused on upcoming U.S. inflation data and the Federal Reserve’s final 2023 policy meeting. Both events could challenge aggressive bets on rate cuts.
On Monday, global stocks and U.S. stock futures show mixed performance. Meanwhile, a U.S. dollar index rises, indicating cautious sentiment.
Tony Sycamore, market analyst at IG Australia Pty, finds it prudent to see some profit-taking.
He expects any drops toward the $37,500 to $40,000 range to be well-supported by “dip buyers.” These investors capitalize on price drops to buy at lower rates.
Year-over-year, Bitcoin has surged over 150%, driving a broader recovery in digital asset prices following a $1.5 trillion slump in 2022.
However, the currency remains well below its pandemic-era peak of nearly $69,000, set just over two years ago.
Caroline Mauron, co-founder of Orbit Markets, suggests that a “less hawkish” message from the Fed could lead to a retesting of Bitcoin’s recent high near $45,000.