Bitcoin traders suffered their worst day in a month after turbulence in traditional markets spilled into digital asset trading and caused almost $900m worth of bets to turn sour.
The liquidations that hit leveraged traders come after the US Federal Reserve signalled that it could tighten monetary sooner than many investors had expected to combat rising inflation. The prospect of rising interest rates has caused prices to tumble in equity markets and pushed yields higher on government bonds.
The shift in stance also unleashed a sell-off in bitcoin, which shed 10 per cent of its value in the last 24 hours to trade at $42,645 according to the FT Wilshire bitcoin price gauge. The sharp drop from about $47,000 washed out $895m worth of positions on exchanges, in the biggest clear-out since December 3, according to Coinglass data.
Bitcoin has lost 36 per cent of its value since its all-time high in November, when it traded above $67,000.
The influence of events in traditional markets on digital asset prices has been growing in recent months due to the involvement of Wall Street players in cryptocurrency markets. This tightened the relationship between equity markets and bitcoin’s price, as large investors react to events.
Despite the ructions, Goldman Sachs forecast this week that bitcoin could hit $100,000, if it took away market share from gold. Both are seen by some analysts and investors as a way of shielding portfolios against elevated levels of inflation at present sweeping the globe.
Zach Pandl, co-head of global foreign exchange, interest rates and emerging markets strategy at Goldman, said that bitcoin’s share in portfolios was likely to rise as the adoption of digital assets continued, which could push up its price.
“Hypothetically, if bitcoin’s share of the store of value market were to rise to 50 per cent over the next five years . . . its price would increase to just over $100,000,” Pandl wrote in his research note on Wednesday.
