Cryptocurrencies have suffered significant declines, with Bitcoin (BTC) plummeting below $66,000 and altcoins falling as much as 10% to 15%, marking a difficult day for risk assets.
Ryze Labs warned investors in a report to brace for continued market weakness even after the current downturn, which it attributed in part to the ongoing tax season.
In the US trading session, digital assets succumbed to the risk-off sentiment prevalent in traditional markets amid heightened geopolitical tensions. Bitcoin, which hit $71,000 this morning, fell sharply to $66,000 and then rebounded slightly to $66,700, falling more than 5% in 24 hours.
Ethereum (ETH), the second-largest cryptocurrency by market capitalization, reflected Bitcoin’s decline, plummeting 12% to $3,100 and recovering slowly, reducing the loss rate to 8%.
The broader cryptocurrency market took a further hit, with the CoinDesk 20 Index (CD20) falling nearly 10%. Altcoins such as Cardano’s ADA, Avalanche’s AVAX, Bitcoin Cash (BCH), Filecoin (FIL), and Aptos (APT) suffered losses ranging from 15% to 20%.
The market turmoil led to the largest leverage losses in a month and the liquidation of about $850 million in leveraged derivatives trading positions across all digital assets, according to CoinGlass data. Long positions worth $770 million were particularly affected, as investors who had bet on rising prices were caught off guard by the sudden recession.
The decline in cryptocurrency prices coincided with a decline in stock markets amid heightened geopolitical tensions in the Middle East. Warnings from US authorities about the possibility of a serious Iranian attack on Israel have created a risk-averse mood, leading investors to seek refuge in traditional safe-haven assets such as Treasury bonds and the US Dollar Index (DXY).
Meanwhile, digital asset investment firm Ryze Labs warned of near-term market flexibility due to the upcoming tax season but maintained a positive long-term outlook. We expect relief for the asset class as policymakers may adjust monetary policy to encourage U.S. government debt rollovers.
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