The cryptocurrency market faced a sudden collapse on December 11 when the price of Bitcoin plummeted 6.5% in 20 minutes. Bitcoin has rebounded for most of 2023, rising more than 150% since January 1. However, from around $43,300 early Sunday morning, it suddenly fell below the $41,000 level.
key point
- The price of Bitcoin suddenly fell 6.5% in 20 minutes on December 11, falling from $43,357 to below $41,000.
- The drop wiped out nearly a week’s worth of Bitcoin gains and liquidated more than $270 million in long BTC positions.
- Ether and other major cryptocurrencies such as BNB, XRP, and Solana also recorded significant losses.
- The decline wiped out $1.2 billion in BTC futures open interest, which now stands at approximately $17.9 billion.
- The drop was the biggest daily Bitcoin price drop in a month, despite BTC rising 150% since early 2023.
The plunge erased nearly a week’s worth of price gains for the major cryptocurrency. Bitcoin prices ended an eight-week upward trend just before the crash, hitting a 2023 high. The drop wiped out leveraged trades, resulting in the liquidation of $270 million worth of long Bitcoin positions.
In addition to Bitcoin, major cryptocurrencies such as Ether, BNB, XRP, and Solana also suffered significant losses of 5-9% each during the day. Ethereum fell from around $2,365 to around $2,225 in 20 minutes. Total open interest in Bitcoin futures also decreased significantly, with $1.2 billion wiped from derivatives markets and open interest reaching $17.9 billion.
The sudden plunge comes just before a week filled with major events that could increase volatility in cryptocurrency markets. Key data on US inflation is due to be released this week, which will influence the Federal Reserve’s monetary policy decisions. The Federal Reserve also holds its final policy meeting for 2023 this week. Markets expect the Fed to keep interest rates steady for the time being, while most analysts expect core inflation to gradually improve.
So what triggered the cryptocurrency’s drastic reversal of fortunes? After several months of bullish momentum, the market entered a period of cooling and profit taking. Technical indicators have been pointing out that Bitcoin is heating up as it approaches the recent $50,000 price level. Capricious traders may have rushed for the exits at the first sign of weakness.
The crash wiped out overleveraged long positions, triggering a series of liquidations. Although it may be painful in the short term, this could allow buying demand to resume and Bitcoin to gain firmer support before continuing its upward trend. The key $40,000 level could now provide strong support after being held during the collapse.
With cryptocurrency volatility increasing this week, traders will be watching to see if BTC will retest lower support levels before regaining bullish momentum. However, the long-term upside potential of Bitcoin and cryptocurrencies remains intact even after recent positive developments such as ETF filings and institutional adoption. One crash isn’t enough to stop most cryptocurrency believers who have weathered much more violent storms before.