The crypto markets faced an abrupt crash on December 11th, led by Bitcoin’s swift 6.5% price drop within 20 minutes. Bitcoin had been rallying for most of 2023, gaining over 150% since January 1st. However, it suddenly fell from around $43,300 down to below the $41,000 level early Sunday morning.
- Bitcoin price suddenly dropped 6.5% in 20 minutes on Dec. 11, falling from $43,357 down to below $41,000
- The drop wiped out almost a week’s worth of gains for Bitcoin and caused over $270 million in long BTC positions to be liquidated
- Ether and other major cryptocurrencies like BNB, XRP, and Solana also posted significant losses
- The decline wiped out $1.2 billion in open interest in BTC futures, which now sits at around $17.9 billion
- The drop was the largest single-day Bitcoin price decline in over a month, despite BTC having rallied 150% since the start of 2023
The plunge wiped out nearly a week’s worth of price gains for the leading cryptocurrency. Bitcoin’s price had closed out eight straight weeks of gains right before the crash, hitting 2023 highs. The drop caused over $270 million worth of long Bitcoin positions to get liquidated as leveraged trades were wiped out.
Besides Bitcoin, major cryptocurrencies like Ether, BNB, XRP and Solana also faced significant single-day losses of 5-9% each. Ether fell from approximately $2,365 down to around $2,225 within the span of 20 minutes. The total open interest in Bitcoin futures saw a major decline as well, with $1.2 billion wiped from the derivatives market, leaving the open interest at $17.9 billion.
The sudden crash came right before a week filled with major events that could increase volatility in crypto markets. Key data on US inflation is scheduled to come out this week, which will impact Fed monetary policy decisions. The Federal Reserve is also having its final policy meeting of 2023 this week. Markets expect the Fed to hold interest rates steady for now, while most analysts predict gradual improvements in core inflation prints.
So what triggered this abrupt reversal in crypto’s fortunes? After months of bullish momentum, the markets were due for a cooldown and profit-taking. Technical indicators had been pointing to Bitcoin being overheated lately as it approached the $50,000 price level. Skittish traders may have rushed for the exits on spotting the first signs of weakness.
The crash also flushed out overleveraged long positions, causing a cascade of liquidations. While painful in the short-term, this may renew buying demand and allow Bitcoin to establish firmer support before continuing its uptrend. The key $40,000 level may now offer strong support after holding during the crash.
As crypto volatility picks up this week, traders will watch for BTC to retest lower support levels before regaining its bullish momentum. But the long-term upside potential for Bitcoin and crypto remains strongly intact after recent positive developments like ETF filings and institutional adoption. One crash alone will not deter most crypto believers who have weathered much fiercer storms before.