Bitcoin experienced a significant downturn on Thursday, falling to around $84,500. This decline is part of a broader "risk-off" move impacting global markets, with equities, tech stocks, and even gold experiencing sell-offs.
The price of Bitcoin has struggled to maintain levels between $86,000 and $89,000 this week and has only risen 1% in January. The fall of Bitcoin occurred alongside declines in other major tokens; Ether fell roughly 6% to near $2,800, Solana dropped about 5% to around $118, and XRP slid approximately 5% to near $1.80.
The broader market selloff was triggered by several factors. Microsoft shares plummeted 12% after its earnings report, raising concerns about the returns on AI investments. This dragged down the technology sector, with Tesla, Google, and Nvidia also experiencing declines. Investors are showing some skepticism about the large amounts that companies are spending to develop AI and when the returns on those investments will materialize.
Gold, which had recently surged past $5,500 an ounce, also reversed sharply, falling nearly 5% as investors reduced exposure across asset classes. This reversal in gold prices contributed to the overall market turbulence.
The market volatility led to substantial liquidations in the crypto market. Data from Coinglass indicates that over $360 million in positions were liquidated in a single hour, with long positions overwhelmingly affected. Total liquidations over the past 24 hours approached $700 million.
The Federal Reserve's recent decision to hold interest rates steady also played a role in the market downturn. The Fed indicated that it needs more evidence that inflation is moving sustainably toward its 2% target before considering further easing. This cautious stance has weighed on risk-sensitive assets like cryptocurrencies, as investors reassess the outlook for liquidity conditions.
The simultaneous decline in stocks, crypto, and precious metals suggests a market-wide liquidation event driven by tightening liquidity, elevated volatility, and rapidly shifting investor sentiment. Bitcoin's failure to hold above the $90,000 level triggered technical selling and liquidations. Investors rotating into gold and silver as geopolitical and macro risks increased also reduced demand for crypto assets.
Bitcoin mining stocks have also been impacted, with companies like Strategy Shares, MARA Holdings, and Riot Platforms all experiencing significant losses. This decline is due to the close tie between mining profitability and Bitcoin's price.
