In a turbulent day for the crypto market, Bitcoin experienced a significant 8% drop on Wednesday, erasing the entire upside move observed on January 1. The bearish trend was triggered by growing anxiety surrounding the anticipated approval of a spot Bitcoin ETF entering the market.
The sharp decline prompted the liquidation of over $600 million worth of positions across the digital asset space, affecting 181,697 traders in the past 24 hours. The total liquidations amounted to a staggering $634.48 million, with the largest single liquidation order occurring on Huobi – a BTC-USDT trade valued at $14.26 million.
Bitcoin, after reaching a morning high of $45,500, tumbled to as low as $40,800 before rebounding to $42,200. The open interest in the market declined by $2 billion due to liquidations, the decreasing value of Bitcoin, and crypto traders trimming exposure on both the long and short sides.
The ripple effect extended to other top 10 digital assets, with Ethereum losing nearly a tenth of its value, dropping below $2,200, and Solana plummeting over 15% in a single day to less than $98. XRP and Cardano also experienced significant declines, falling over 10% and 14%, respectively.
The crypto market is now bracing for the U.S. Securities and Exchange Commission’s (SEC) decision on several spot Bitcoin ETF applications in the upcoming days. Analysts have expressed varying sentiments, with Matrixport analyst Markus Thielen suggesting a more pessimistic outlook. Thielen predicts that the SEC will not approve a Bitcoin spot ETF in January and is likely to reject all applications. He emphasized the regulators’ lack of political incentive to greenlight spot ETFs, which would grant legitimacy to Bitcoin as an alternative store of value.
This divergence from general market sentiment raises doubts about the likelihood of swift regulatory approval. Several observers had anticipated approvals for pending applications by the end of the week. Matrixport’s warning of a potential rejection by the SEC adds to the uncertainty, suggesting that a rejection could drive the price of BTC down to $36,000. As the crypto community awaits the SEC’s decision, the market remains on edge, with traders closely monitoring developments and adjusting their strategies accordingly.
