After a strong start to the year, Bitcoin (BTC) and altcoins are weathering a sharp correction that has led to more than $670 million in liquidations in just a few hours.
According to the crypto exchange data platform Mint glasstraders have suffered liquidations worth $670 million in the past 24 hours, with the overwhelming majority being traders who were long positioned as markets corrected.
Bitcoin earlier fell more than 8% from $45,469 to $41,805 in about 3 hours, while Ethereum and other altcoins fell more sharply.
Although the exact cause of the market correction is unknown, it does coincide with a viral situation report from crypto-financial service provider Matrixport.
The company predicts that the U.S. Securities and Exchange Commission (SEC) will eventually reject applications for spot Bitcoin exchange-traded funds (ETFs), despite the vast majority of market participants expecting the opposite.
In an article titled “Why the SEC Will Reject Bitcoin Spot ETFs Again,” Matrixport says there is no logical reason to expect SEC Chairman Gary Gensler, who has been vocal about crypto needing stricter regulation, will vote for an ETF.
Matrixport also says markets may already have become frothy given the large increase in debt levels. The firm suggests that bulls looking to hedge their long positions may want to look at put options at the $40,000 strike price in the event of a collapse below support.
“Since traders started betting on an ETF approval in September 2023, at least $14 billion in additional fiat and leverage has been deployed into crypto. Some of these flows may be associated with easier macroeconomic conditions as the Fed has turned dovish. However, of that $14 billion in additional long positions, $10 billion could be related to the expected adoption of ETFs.
If there is any denial from the SEC, we could see cascading liquidations as we expect most of the $5.1 billion in additional perpetual Bitcoin futures to be settled. We could see Bitcoin prices drop -20% very quickly and fall back to the $36,000/$38,000 range.
Assume that market participants have not heard of any approval by Friday, January 5, 2024. In that case, Matrix on Target recommends traders hedge their long exposure by buying the $40,000 strike puts before the end of January or even outright short Bitcoin through options. .”
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Featured image: Shutterstock/SimoneN/bobyramone