Bitcoin(BTC) took a sharp tumble just a few days before the halving event, causing a ripple effect across the cryptocurrency market. The price of Bitcoin crashed over 6% to hit $65,000, triggering a broader 7.8% correction in the market. Altcoins also saw significant declines, with the top ten cryptocurrencies experiencing corrections ranging from 8-15%.
The sudden drop in Bitcoin price led to around $1 Billion in bullish crypto bets getting liquidated in the past 24 hours, marking the most significant drop in a month, according to Coinglass data. This financial shake-up occurred amidst escalating geopolitical tensions, pushing investors towards traditional safe havens like bonds and the dollar.
The turbulence extended beyond the crypto market, with the S&P500 and gold prices retracing as well. This suggests that investors are grappling with concerns about CPI and inflation, with the possibility of a Fed interest rate cut diminishing.
In derivative markets, there is growing unease among traders, especially with the Bitcoin halving approaching, which is historically seen as a bullish event. Implied volatility for Bitcoin options has surged recently, indicating reduced confidence among market players regarding price direction. This increase in volatility often prompts traders to pay more to hedge existing positions or speculate on potential price swings.
Bitcoin’s volatility spiked further amidst global financial market turmoil fueled by geopolitical risks. Implied volatility for near-term contracts soared from 59% to 71% in just two days, indicating a growing anticipation of short-term price swings.
The altcoin market also saw significant corrections, with Ether, Solana, Dogecoin, Cardano, and Polkadot all experiencing losses ranging from 12% to 15%.
As traders navigate the uncertain market conditions, they are possibly paying high premiums to buy downward protection through options. The current market environment is characterized by increased volatility and a sense of caution among investors.
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