According to Coinworld’s report, data from Coinglass indicates that Bitcoin has fallen below $60,000 for the first time since late June, erasing $8.4 million worth of long-term contracts in just the past hour. Ethereum derivatives traders have also felt this pain, with approximately $8.8 million worth of ETH long-term contracts wiped out in the last hour. Long-term contracts are essentially bets that the price of underlying assets like Bitcoin or Ethereum will rise. Conversely, traders use short contracts to bet that the price of the target asset will fall. If the gap between the contract’s target price and the spot price is too large and traders cannot cover the margin, they may be forced into liquidation.
The day before this sudden plunge, the US Bitcoin spot ETF saw a net outflow after five days of inflows. At the time of writing, the price of Bitcoin has rebounded above $60,000, trading at $60,215.46, down 3.8% compared to the same period yesterday. Meanwhile, Ethereum’s price is somewhat sluggish. Data from Coingecko shows that at the time of writing, it is trading at $3,308.61, down 4% from the past 24 hours.
The market has been preparing for the potential impact of the Mt.Gox trustee’s repayment to creditors, as the trustee has been overseeing the bankruptcy proceedings of the now-defunct exchange. Over 14,000 Bitcoins may begin to fall back into the hands of Bitcoin holders who have been waiting for ten years.
There are also issues of US inflation and federal interest rates, which have had a significant impact on the cryptocurrency market. Investors have been in risk-averse mode—preferring government bonds over riskier assets like stocks and cryptocurrencies—and the Federal Open Market Committee has kept the target interest rate at 5.25% to 5.50% since July 2023.
Federal Reserve Chairman Jerome Powell, speaking at an event hosted by the European Central Bank yesterday, gave almost no assurance that the Federal Open Market Committee is eager to lower the target interest rate. Powell said at a panel discussion at the ECB’s Central Banking Forum yesterday, “Frankly, because the US economy is strong, the labor market is strong, we have the ability to take our time and do this right.” “That’s the plan.”
When the host asked him if the Federal Open Market Committee would cut interest rates in September, he declined. Powell added that if the Fed cuts interest rates too soon, it could “undermine the good work we’ve done to reduce inflation.”