It Took 20 Minutes to Erase a Week-Long Rally

• Bitcoin briefly dipped below $41,000 around 9:00 p.m. EST Sunday.
• The roughly 6.5% drop happened in about 20 minutes, erasing the gains made over the last week.
• Volatility is growing ahead of November inflation data and the Fed’s policy decision this week. 

Bitcoin saw nearly one week’s worth of gains wiped out in a span of roughly 20 minutes Sunday night in New York.

The cryptocurrency saw a sharp 6.5% plunge around 9:00 p.m. ET, moving from above $43,300 to as low as $40,659, data from TradingView shows. 

The price of bitcoin hovered at about $41,711 at 11:30 a.m. ET on Monday, down by about 4.8% in the last 24 hours. 

Ether, solana, and other tokens also sold off as trading began in Asia on Monday and were still down as the trading day got underway in North America. 

The cause of the sudden move down was not immediately clear, but Coinglass data cited by Coindesk shows a flurry of positions liquidated in the 12 hours beginning on Sunday evening, with upwards of $335 million in liquidations across cryptocurrencies, and about $300 million of that in long positions. Bitcoin alone saw more than $89 million in liquidations. 

Volatility is expected this week as traders await key November inflation data on Tuesday and the Federal Reserve delivers its latest decision on monetary policy on Wednesday. Stocks have wavered to start the week as investors brace for a packed events schedule. 

Wall Street largely expects central bank policymakers to make no change to interest rates until early 2024. Economists at ING, for their part, have predicted the Fed will cut rates six times next year. 

Last week, cryptocurrencies were enjoying an early Santa Claus rally, with bitcoin changing hands above $44,000 on December 6. Various other tokens also saw strong gains as bullish traders piled in on growing optimism around events like the approval of a spot bitcoin ETF in the US and the upcoming bitcoin halving in mid-2024. 

Despite the sharp sell-off to start the week, bitcoin has notched more than 150% gains in 2023.

Helping drive momentum, too, has been the relatively low supply of bitcoin on the market, according to Glassnode. Broadly, long-term investors have held onto their tokens, with some data suggesting the amount of held bitcoin among wallets with minimal spending history recently hit a new record of 15.4 million.