Cryptocurrency Market Sees Significant Losses Amid Speculation of Emergency Rate Cut
The cryptocurrency markets have taken a hit, with the overall market value dropping by 12.5% to approximately $1.97 trillion. This marks the first time since mid-February that the market value has fallen below $2 trillion.
The Impact of Fed’s Interest Rate Stance
Recent speculation of an emergency rate cut by the Federal Reserve has added to the market uncertainty. This speculation has been fueled by the Fed’s stance on interest rates and its potential impact on the market.
The price of Bitcoin, the largest cryptocurrency, has plummeted below $60,000 to $53,399, representing a 10.8% decline in the past 24 hours. Ethereum, the second largest cryptocurrency, has also seen a sharp drop of 21.2% to $2,306 after briefly touching $2,240.
The Ripple Effect of Ethereum’s Decline
Ethereum’s decline has had a ripple effect across the cryptocurrency ecosystem. As the price of Ethereum dropped, the peak gas fee reached 710 GWI, with further declines potentially leading to significant liquidations in decentralized finance protocols, according to cryptocurrency journalist Colin Wu.
“If Ethereum falls to $1,950, $92.2 million in cryptocurrency assets in the DeFi protocol will be liquidated, and if it falls to $1,790, $271 million in DeFi assets will be liquidated,” Wu stated.
The widespread impact of the market decline is evident in the clearing data, with over $800 million liquidated in the past 24 hours, where long positions accounted for $699.45 million and short positions for $110.56 million. The largest single liquidation occurred on Huobi, totaling $27 million in BTC USD pairs.
Market Sentiment and Potential Emergency Rate Cut
The Cryptocurrency Market’s Fear and Greed Index dropped to 26, signaling a “fearful” state and reflecting the prevailing pessimism in market sentiment. Many attribute the recent downturn to macroeconomic conditions, including the Bank of Japan’s hawkish stance and the Federal Reserve’s cautious approach to interest rates.
Despite market expectations, the Federal Reserve’s reluctance to cut interest rates and sluggish U.S. economic indicators are driving investors towards safe assets, raising concerns about the need for aggressive monetary policy interventions. Some traders believe that the current situation may necessitate an emergency rate cut by the Federal Reserve in 2024, with the likelihood of this scenario increasing by 11% in the past 24 hours according to PolyMarket data.
