After a strong start to the week, Bitcoin’s (BTC) price took a nosedive on Thursday, losing over 7% of its value. The flagship cryptocurrency fell from $39.902 to $36.804 in about 2 hours, printing its lowest price in 2.5 months.
However, the cryptocurrency has found some support around the $36,500 level and has since stabilized. While the near-term outlook remains bearish, with a key resistance level at $40.000, Bitcoin still remains well above its yearly lows of $29.807. As such, Thursday’s sell-off is unlikely to be more than a minor setback in the grand scheme of things.
That said, Thursday’s sell-off was triggered by a retracement in the stock market, as investors took profits after a major rally for stocks following the Federal Reserve’s 50 basis point (bp) rate hike on Wednesday. Markets rallied after the Fed said it wouldn’t move as quickly as some had feared to hike interest rates.
However, stocks suffered their worst day of the year on Thursday as the Dow fell more than 1,000 points, while the S&P 500 and the tech-heavy Nasdaq plunged 3.7% and 4.9%, respectively.
The move appears to be driven in large part by rising interest rates. As the rate futures markets indicate higher odds of a 75-basis point hike in June, investors have been rushing to sell their positions and cut their losses. As Coinglass reports, this has led to a massive liquidation cascade, with over $145 million in crypto assets being liquidated in one hour. And while Bitcoin and ETH seem to be taking the brunt of these losses, $68.2 million and $18.6 million, respectively, many other coins are feeling the pressure as well.
Overall, it seems that we could be entering a more cautious period for the volatile crypto market. But with so much uncertainty surrounding future trends in prices and liquidity, only time will tell how this story will unfold.