On March 15, Beijing time, Bitcoin staged a "high dive", once falling below $66,000, with the lowest price at $65,580. Just the previous trading day, Bitcoin hit a record high, approaching $74,000. CoinGlass data shows that in the past 24 hours, nearly 250,000 people have been liquidated in the Bitcoin market, with a total liquidation amount of US$812 million (approximately RMB 5.84 billion).

Bets that the Federal Reserve will ease monetary policy have helped fuel a strong rally in cryptocurrencies in recent months. The U.S. PPI data for February released last night once again exceeded expectations, and investors are reassessing bets on the Federal Reserve's interest rate cut.

Some analysts pointed out that under the background of recent record highs in Bitcoin prices, short-term market overheating, and sharp increase in leverage ratios, if some funds take profits and cause the market to fall back, it may bring greater price fluctuations and market risks.



Bitcoin plunges

On March 15, Beijing time, Bitcoin staged a "high dive", once falling below $66,000, with the lowest price at $65,580. As of press time, Bitcoin was trading at $67,970.7 per coin, down more than 7% during the day.



CoinGlass data shows that in the past 24 hours, 248,000 people were liquidated in the Bitcoin market, with a total liquidation amount of US$812 million (approximately RMB 5.84 billion).

Affected by this, most U.S. cryptocurrency stocks fell before the market opened. Coinbase fell by more than 5%, Marathon Digital and MicroStrategy fell by more than 4.5%, and Riot Platforms fell by nearly 3%.

Bitcoin has recently been hitting all-time highs as investors pile into the digital asset. On March 14, Bitcoin hit a record intraday high, approaching US$74,000. Compared with the price of less than US$43,000 at the end of last year, the overall price increased by more than 70%.

The logic behind this wave of Bitcoin’s rise is relatively clear. First, the issuance of Bitcoin spot ETFs brings more incremental funds to the market. On January 11, 2024, the U.S. Securities and Exchange Commission officially approved 11 Bitcoin spot ETF applications, including BlackRock and other institutions. Since its listing, the Bitcoin ETF has been attracting gold at a rapid pace. Farside Investors data shows that as of March 12, the Bitcoin spot ETF has accumulated a net inflow of US$10.1003 billion since its launch. This rate of inflow fully reflects the market’s strong interest and demand for Bitcoin ETFs, and it also drives spot Bitcoin prices higher.

The second is that "halving" and other measures are good for fermentation. It is understood that Bitcoin’s “halving” is the halving of mining rewards, which occurs approximately every four years. The specific time depends on the block generation speed of the Bitcoin network. This will reduce the supply of Bitcoin, expected on April 23, 2024, when the block reward will drop from 6.25 BTC to 3.125 BTC.

In addition, the expectation of a mid-year interest rate cut by the Federal Reserve has also added fuel to the skyrocketing price of Bitcoin. A previous report released by Goldman Sachs showed that the Federal Reserve will begin to significantly cut interest rates in 2024, at least four times, and the first interest rate cut will begin in June.

Behind the recent surge in Bitcoin, Asian investors have been extremely active. According to cryptocurrency trading data from TheBlock, investors in Asian countries account for approximately 70% of Bitcoin trading volume.



Investment risks cannot be ignored

Behind the rising price, Bitcoin may be brewing risks.

Some analysts pointed out that under the background of recent record highs in Bitcoin prices, short-term market overheating, and sharp increase in leverage ratios, if some funds take profits and cause the market to fall back, it may bring greater price fluctuations and market risks.

Michael Hartnett, chief investment strategist at Bank of America, said that amid the record surge of the so-called "Rose Seven" stocks in the technology industry and the all-time high of cryptocurrencies, the market is showing the characteristics of a bubble.

Additionally, JPMorgan analysts led by Nikolaos Panigirtzoglou wrote on Thursday: “We believe MicroStrategy’s debt-financed Bitcoin purchases add leverage and froth to the current cryptocurrency rally and increase the risk of more severe deleveraging during potential future downturns. ”

JPMorgan noted that MicroStrategy has purchased $1 billion in Bitcoin this year and another $1 billion in the fourth quarter of 2023. Saylor, founder of MicroStrategy, previously explained that in order to obtain the funds needed to purchase Bitcoin, the company used leverage.

Too much leverage in Bitcoin’s rally has also raised concerns among other commentators. Galaxy CEO and cryptocurrency enthusiast Mike Novogratz said: “I think the market is too leveraged right now. There will be a shakeout and people won't be able to afford that much leverage. ”

Ma Qianli, an expert from the Zhejiang Provincial Blockchain Standards Committee, said: “Bitcoin’s high returns are accompanied by high risks. For professional investors, they can continue to study and allocate, but for general investors, especially retail investors, they need to be cautious. ”

Gao Chengshi, executive member of the China Computer Society Blockchain Committee, also pointed out: “Bitcoin generally relies on the expansion of consensus to support its price. Unlike traditional commodities, which have fundamentals that can be analyzed, investors other than professional speculators are not recommended to invest in Bitcoin derivatives, but they can hold a certain proportion of spot stocks for a long time. ”

Editor: Ye Shuyun

Proofreading: Ran Yanqing

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