The world’s largest cryptocurrency, Bitcoin, crosses $24.7K on Monday, reaching its highest point in two months. The surge came after a steady rise in Bitcoin’s price over the past week. However, the sudden jump in price also saw a wave of liquidations across the market.
Renewed interest in Bitcoin as a hedge against inflation and geopolitical risks
Liquidations occur when exchanges automatically close out leveraged positions to prevent further losses. When the price of Bitcoin rises too fast, traders who borrowed money to buy it find themselves in a situation where they need to put up more collateral to maintain their positions. If they can’t do so, the exchanges will automatically liquidate their positions, selling off their Bitcoin holdings to cover their losses. The liquidations that occurred on Monday were significant, with over $1.6 billion worth of Bitcoin futures contracts being liquidated across various exchanges. This was the highest amount of liquidations seen in the cryptocurrency market in two months.
Liquidations are a sign of the growing maturity of the cryptocurrency market.
The sudden surge in Bitcoin’s price is likely due to a combination of factors, including the recent increase in institutional adoption of Bitcoin and the ongoing macroeconomic uncertainty caused by the COVID-19 pandemic. In recent months, several large corporations, including Tesla, MicroStrategy, and Square, have invested heavily in Bitcoin, signalling their confidence in the long-term prospects of the cryptocurrency. The ongoing global economic uncertainty has also contributed to Bitcoin’s recent price rise. As governments worldwide continue to roll out stimulus packages to prop up their economies, investors are increasingly turning to Bitcoin as a hedge against inflation and currency devaluation.
Increased regulatory scrutiny could potentially limit the growth of the market.
While the sudden jump in Bitcoin’s price may be exciting for investors after Bitcoin crosses $24.7k, it’s important to remember that the cryptocurrency remains highly volatile. Its price can swing dramatically in a short period, as evidenced by the liquidations that occurred on Monday. As always, investors should approach the cryptocurrency market cautiously, doing their own research and taking a long-term view of their investments.
Overall, Bitcoin crossing $24.7K is a positive development for the cryptocurrency market, signalling growing institutional interest and continued demand from investors seeking a safe-haven asset in uncertain times. However, investors must remain vigilant and carefully manage their risk in this highly volatile market.