Categories: Forex News
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2024-01-24 9:39 AM

Bitcoin Rollercoaster: Big Drops and Swift Recovery Rattle Markets

  • Bitcoin Price Fluctuation: Bitcoin experienced a significant price drop, falling to  $38,555 on Binance, and later recovering above ZAR 759,600 (around $40,000). This volatility was marked by heavy selling pressure and impacted the markets.
  • Massive Liquidations in Derivatives Market: The decline in Bitcoin's price led to the liquidation of positions worth over a billion Rand, including ZAR 1.05 billion (about $55.52 million) in long positions and ZAR 520.53 million (around $27.42 million) in short positions, primarily in the derivatives market.
  • Influence of GBTC Redemptions and Market Speculation: The downturn is partly attributed to the redemptions of Grayscale Bitcoin Trust (GBTC) by bankrupt firms like FTX. Additionally, the market was influenced by speculation around Barry Silbert, CEO of Digital Currency Group, and his strategy of compensating firms with GBTC instead of Bitcoin, leading to increased GBTC liquidations.
By Nonhlanhla

In the early hours of Tuesday, Bitcoin’s price plummeted to $38,555 on Binance, signaling a rough patch for the cryptocurrency. This significant drop in value heightened selling pressure on BTC leading to a further decline in prices. However, the popular digital currency managed a rebound, surpassing the key ZAR 759,600 (approx. $40,000) mark on Wednesday.

This dramatic fluctuation in Bitcoin’s value resulted in the liquidation of long positions worth ZAR 1.05 billion (approx. $55.52 million) and short positions amounting to ZAR 520.53 million (approx. $27.42 million). Such market movements were particularly noteworthy in the derivatives market, where cascading liquidations occurred.

Closing Tuesday at the low point of ZAR 732,415.55 (approx. $38,555), Bitcoin’s value reflected a significant drop from the crucial ZAR 759,600 (approx. $40,000) level. This setback was part of a broader market correction that affected other high-market-cap assets.

The derivatives market witnessed substantial liquidations, primarily driven by the decline in Bitcoin’s price. Market experts attribute this downturn to the redemptions of Grayscale Bitcoin Trust (GBTC) by the bankrupt crypto exchange FTX, a significant event affecting global and South African markets.

Vijay Boyapati, a noted author and crypto expert, suggests that the approval of a Bitcoin ETF by the U.S. Securities and Exchange Commission contributed to the BTC price drop. Boyapati highlights that bankruptcy estates, including FTX, have redeemed their GBTC holdings. He asserts that such actions, particularly by firms like FTX, are closely linked to Barry Silbert, CEO of Digital Currency Group, the parent company of Grayscale.

Silbert’s strategy to enhance assets under management involved compensating firms with GBTC instead of Bitcoin. Consequently, several institutions are now opting to liquidate their GBTC holdings to reclaim their capital, valued at significant amounts in South African Rand.

Moreover, Boyapati points out that Silbert faces investigations by various U.S. regulatory and law enforcement agencies. This scrutiny could lead to a more pronounced decline in Bitcoin’s price, especially if there are significant outflows from GBTC.

Another factor contributing to Bitcoin’s price volatility is profit-taking by large-scale investors or ‘whales’. This activity is particularly relevant in the South African context, where cryptocurrency has seen increased adoption.

From a technical standpoint, Bitcoin’s price faced a setback, dropping to ZAR 732,415.55 (approx. $38,555). Although it recovered above ZAR 763,475 (approx. $40,250) on Wednesday, the likelihood of it falling back to the support zone remains high.

This zone, ranging between ZAR 729,121.02 (approx. $38,398) and ZAR 763,975.51 (approx. $40,249), is crucial as 1.29 million addresses have acquired approximately 727,310 BTC tokens within this range. South African investors and global market watchers are closely monitoring these developments, as the future of Bitcoin’s price remains uncertain.

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Nonhlanhla

Nonhlanhla P Dube is a senior news reporter. Nonhlanhla is a student of International Relations at the University of South Africa. She reports primarily on personal finance and economics. You can contact her on: Email: nonhlanhla@rateweb.co.za

Tags: Bitcoin