Crypto traders lose over $250 million in liquidations

Risk assets have conventionally seen exceptionally high intraday volatility because of Federal Reserve’s policy decisions

The U.S. Federal Reserve’s position on interest rate hikes and high inflation is the main factor in deciding the demand for risky assets. The Fed increases the profitability of fixed-income instruments by increasing the cost of capital, but this may be otherwise for the stock market, real estate, commodities, and crypto currencies.

The fact that the Fed plans its meetings well ahead permits Bitcoin traders to get ready for them. Risk assets have conventionally seen exceptionally high intraday volatility because of Federal Reserve’s policy decisions. Still, traders can use derivatives instruments to get the best results as the Fed adjusts interest rates.

Bitcoin worth nearly $132mln was liquidated, while investors lost Ethereum worth $51mln. XRP positions were liquidated for nearly $8mln. The biggest single liquidation order, worth $7.39mln, as per Bitmex.

The data was released after a 25 basis point interest rate hike by the US Fed. Commentators believed that the Fed’s tightening of monetary policy could be halted because of the uncertainty in the banking sector. As per government data, the Federal Reserve did not change policy, in spite of consumer inflation dropping to 6.0 per cent Year on Year.

Meanwhile, the crypto market capitalization has declined by 2 per cent during the past 24 hours. The total capitalization is still higher than $1trln, though. Bitcoin’s price has declined in a similar range, even though it is still afloat at nearly $27,000.

As per the data released on March 20, withdrawals from digital assets added up to nearly $500mln. With outflows of $113mln during the last week, bitcoin set the trend.

Once investors know that the Fed is out of measures to check inflation, low emissions of Bitcoin might also prove advantageous. In case interest rates are hiked even more, the U.S. government’s debt repayments might go out of control and probably top $1trln annually.

Risk-takers may gain from leveraging their positions by buying Bitcoin futures contracts. Still, they also risk having their positions liquidated in case the price abruptly declines before the Fed decides on March 22. Due to this, professional traders are more disposed to select options trading methods.