Bitcoin’s 2023 rally phrase is briefly a 7.5% drop toward $40,000

(Bloomberg) — Bitcoin posted its steepest fall in nearly four months as traders moved to lock in profits following a rally of more than 150% this year, prompting major liquidations of bullish bets.

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The largest token fell as much as 7.5% on Monday, its biggest intraday decline since August 18. It pared some losses to trade at $42,383, down 3.3% by 10 am in London. Most major cryptocurrencies fell as the index of the largest 100 digital assets fell sharply since November 22.

“The market’s leverage has risen materially,” said Sydney-based Richard Calvin, co-founder of Digital Asset Capital Management.

Coinglass data shows that around $312 million worth of crypto trading positions that bet on high prices were liquidated as of 7:15 a.m. in London on Dec. 11 — the highest figure since at least mid-September.

Bitcoin has been on a tear this year amid expectations that regulators will give the green light to the first US exchange-traded funds to invest directly in the token, expanding the potential base of crypto investors. Bets that the Federal Reserve will cut interest rates in 2024 have also helped fuel the rally.

Waiting for central bank

Investors are bracing for U.S. inflation data this week and the Fed’s final policy meeting in 2023, both of which could test aggressive wages on rate cuts. Global stocks and U.S. stock futures were mixed on Monday as a dollar gauge rose, a sign of cautious sentiment.

“It makes sense to see some profit taking,” said Tony Sycamore, market analyst at IG Australia Pty. He expects a dip towards the $37,500 to $40,000 range to be “well supported” by buyers.

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Bitcoin is up more than 150% year-to-date, fueling a widespread recovery in digital-asset prices from a $1.5 trillion rout in 2022. The token hit its pandemic-era record of nearly $69,000 two years ago.

According to Caroline Mauron, co-founder of Orbit Markets, the Fed’s “less hawkish” message could “retest” bitcoin’s recent high of $45,000.

–With the help of Siddhartha Shukla.

(The second column adds an intraday comparison.)

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