Cryptocurrency Market Sees $200 Million in Liquidations Following Fed Rate Cut

Cryptonews Economy John Brightwater September 19, 2024

Cryptocurrency Market Sees $200 Million in Liquidations Following Fed Rate Cut

Summary
The U.S. Federal Reserve’s recent 50-basis-point rate cut has triggered a significant bullish trend in the cryptocurrency market, resulting in liquidations nearing $200 million. Bitcoin led with $75 million in liquidated positions, followed by Ethereum at over $35 million. The overall open interest increased by 4%, indicating heightened investor interest despite liquidations.

Following the announcement of a 50-basis-point interest rate cut by the U.S. Federal Reserve, the cryptocurrency market experienced a notable bullish trend, resulting in significant liquidations. Data from Coinglass indicates that total crypto liquidations surged by 46% within a 24-hour period, reaching approximately $200 million. The majority of liquidated positions, amounting to $126 million, were short positions, reflecting market-wide upward momentum. Bitcoin (BTC) led the liquidations with $75 million following a 2.9% increase in price, currently trading near the $62,000 level. The highest single liquidation recorded was $8.9 million for the BTC-USD pairing on the Bybit exchange, as per Coinglass statistics. In total, over 66,000 traders faced liquidation during this time. Ethereum (ETH) followed with liquidations exceeding $35 million, as its price surpassed $2,400. Despite these liquidations, the total open interest in the cryptocurrency market saw a 4% uptick in the last 24 hours, now standing at $58.7 billion. An increase in open interest often signifies fear of missing out (FOMO), potentially leading to further liquidations and price volatility, thereby enhancing positive investor sentiment. The spurt in liquidations coincided with the U.S. Federal Reserve’s first rate cut since March 2020, announced at 18:00 UTC on September 18. In reaction to this announcement, the global cryptocurrency market capitalization rose by 1.9% to reach $2.23 trillion, with daily trading volumes exceeding $120 billion. The U.S. stock market also mirrored this bullish trend.

The cryptocurrency market is highly sensitive to macroeconomic shifts, particularly interest rate adjustments by central banks. When the U.S. Federal Reserve lowers interest rates, it often stimulates investor enthusiasm for risk assets, including cryptocurrencies. The recent rate cut by 50 basis points marked a significant event, being the first such reduction since March 2020, which catalyzed a wave of buying in the crypto sector. The correlation between rate cuts and market reactions is well-documented, with many traders capitalizing on anticipated price movements. The resultant market behavior often leads to substantial liquidations for traders holding opposite positions, particularly in a high-volatility environment.

In summary, the recent 50-basis-point interest rate cut by the U.S. Federal Reserve has had a transformative effect on the cryptocurrency market, inciting a surge in liquidations totaling approximately $200 million. Bitcoin and Ethereum led these liquidations amidst a notable increase in market capitalization and trading volume. The rise in open interest suggests a growing investor confidence, marked by fear of missing out on potential gains. This situation underscores the dynamic interplay between macroeconomic factors and cryptocurrency market fluctuations, illustrating how effectively the sector responds to changes in fiscal policy.

Original Source: crypto.news