Bitcoin Plunges Below $40,000 Amid Economic Uncertainty and Forced Sales
Bitcoin experienced a sharp decline, falling below $40,000 in less than a month, as positive economic data in the US tempered expectations for interest rate cuts and a surge in cryptocurrency flows to exchanges rattled investors. The downturn follows a period of growth fueled by more crypto-friendly regulation in the United States and increased interest from global investors.
The recent dip was not initially triggered by Nvidia’s stronger-than-expected revenue report of $57 billion, despite an initial positive reaction. Though, unexpectedly strong American job figures – 119,000 new jobs in September – dampened hopes for imminent interest rate reductions. Lower interest rates typically encourage investment, including in the crypto market, by providing cheaper access to capital. Market operator FlowDesk also noted a notable flow of cryptocurrency from long-inactive wallets to centralized exchanges, adding to market pressure.
The crypto market’s rally last year gained momentum after Donald Trump’s election win and the introduction of more favorable crypto regulation in the US. This, combined with anticipated interest rate cuts and increased institutional investment, propelled the market to new highs.
Though, the current fall coincides with concerns about a potential bubble in the value of US tech giants, notably those focused on artificial intelligence (AI). High leverage within crypto investments has exacerbated the decline, leading to substantial forced sales. A significant wave of liquidations, triggered by Trump’s threats of new tariffs on China in October, resulted in forced sales of crypto assets worth $20 billion.
The next US interest rate meeting is scheduled for December 10th, and the outcome remains highly uncertain. Investors are also exhibiting reduced risk appetite as the year-end approaches and financial accounts are finalized.
