Bitcoin Price Hits $62k as Fed Rate Pause Triggers $300M Liquidaitons

Bitcoin Price Analysis:

Bitcoin price wobbled below $65,000 on Aug 1 2024, marking 11.50% decline from the weekly timeframe peak with over $330 million worth of positions  liquidated, technical indicators suggest BTC is in danger of further decline.

Fed Rate Pause Decision Spurs Market Turmoil

On July 31, the US Federal Reserve announced a decision to pause interest rate hikes, sparking negative reactions among bullish traders. The anticipation for a rate cut had been high, fuelled by last month’s dovish Non-Farm Payroll (NFP) and Consumer Price Index (CPI) data.

Traders had hoped these indicators would prompt a more aggressive monetary easing stance. However, the Fed’s decision to maintain the current rates dashed these hopes, leading to a significant market correction.

Looking at the yellow-patch in the chart above, we see how BTC price tumbled as low as $62,282 on Aug 1, before rebounding above $63,400 at the time of publication.

Notably, this is the lowest BTC has traded since the weekend of July 14 when Joe Biden pulled-out of the US 2024 elections race, leaving the perceived, crypto-friendly Donald Trump in the drivers seat.

Massive Liquidations in Crypto Markets

Loking beyond the BTC daily price charts, the impact of the US Fed Rate pause on Bitcoin appears to have been exacerbated by massive liquidation in the derivatives markets.

Over the past week, Bitcoin bull traders have latched on to back-to-back bullish euphoria from the Ethereum ETFs launch and Donald Trumps bullish speech at the Bitcoin Nashville conference.

However, the US government had caught many leveraged traders off guard, this week, by first, shifting $2 billion from it seized bitcoin holdings, followed by the Fed rate pause decision all within a frenetic 24-hour period.

As expected, this triggered a cascade of forced liquidations, contributing to the rapid price decline, amplifying the bearish sentiment across the crypto markets.

Over $331 million worth of futures contracts positions were wiped out during the bearish market downtrend that ensued within 24 hours of the Fed rate pause announcement.

According to the latest data compiled by Coinglass, Bitcoin bull traders booked the lion share of the losses, with over $86 million liquidated LONG BTC positions accounting for over 25% of the total wreck recorded on Aug 1.

The liquidation of such a large number of LONG positions reflects a loss of confidence among bullish traders. It suggests that traders’ expectations of a price rise were not met, leading to a reassessment of market conditions.

While the US Fed did hint at a potential rate cut for September, this short-term shift in sentiment could deter potential buyers from entering the market, possibly contributing to further downswings towards the $60,000 mark in the days ahead.