Bitcoin Prices Witness Sharp Decline Days After Hitting 21-Month High

Highlights:

• Bitcoin experienced a significant downturn on Wednesday.
• The digital currency plummeted by as much as 9.2%, briefly dipping below AU$41,000, just a day after reaching a 21-month high above AU$45,000.
• On Wednesday, over AU$600 million in positions across major cryptocurrency exchanges were liquidated.

Cryptocurrency Erases Early Gains in Unexpected Slump

Bitcoin, the world's largest cryptocurrency, experienced a significant downturn on Wednesday, wiping out almost all gains achieved in the first days of the year. This unexpected drop follows a prolonged upswing that defied the broader market trends affecting traditional assets.

Volatility Surges Amid Speculation on SEC Approval of Bitcoin ETF

The digital currency plummeted by as much as 9.2%, briefly dipping below AU$41,000, just a day after reaching a 21-month high above AU$45,000. This marks the most substantial price swings in over two months. The heightened volatility spilled over into crypto-related stocks, with Coinbase Global Inc. shares falling up to 8.1% before a partial recovery.

Bartosz Lipiński, CEO of Cube.Exchange, attributed the increased volatility to uncertainty surrounding the approval of a spot Bitcoin ETF by the Securities and Exchange Commission (SEC). Lipiński stated, "Volatility is increasing over the prospect of whether or not the SEC will approve a spot Bitcoin ETF.

Markets were a bit overbought."

Massive Liquidations Across Cryptocurrencies Amidst Price Swings

On Wednesday, over AU$600 million in positions across major cryptocurrency exchanges were liquidated, representing the largest amount since December 11, according to Coinglass data. The market's anticipation of the SEC decision regarding the Bitcoin ETF contributed to this massive sell-off.

Matrixport Analyst Predicts SEC Rejection of Bitcoin ETF Proposals

Matrixport analyst Markus Thielen predicted a potential rejection of all Bitcoin ETF proposals by the SEC this month. Thielen noted that recent applications might not meet the necessary requirements for SEC approval. The outcome of the decision could trigger responses from issuers against the regulatory body.

Market-wide Impact as Other Assets Follow Bitcoin's Lead

The decline in Bitcoin's value had a ripple effect on other cryptocurrencies, with Ether dropping 11% and Solana's SOL experiencing a significant 28% tumble before both partially rebounded. Analysts expect increased short-term volatility as markets assess risk in various asset classes at the beginning of a year filled with uncertainties.

Fadi Aboualfa, Head of Research at Copper Technologies Ltd., commented, "We will likely see some increased volatility in the short term as markets start to measure risk in all asset classes, as we enter a year that has many question marks."

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