Bitcoin Price Swings Spark $150M Liquidations in Futures Market: What’s Behind the Market Frenzy?

Bitcoin (BTC) traders experienced a rollercoaster ride on Wednesday as the cryptocurrency saw its price fluctuate wildly throughout the day. BTC hit a session high of just above $30,000, up over 6% on the day, before dropping to session lows later in the day in the $27,200s, down 3.8% from the high. This high-to-low swing of over 9% is the largest intra-day trading range since March 17th, when BTC jumped nearly 10% in one day.

Despite the volatility, Bitcoin ended the session flat in the mid-$28,500s, where it continues to trade during Asia Pacific hours. However, market participants were not unscathed. According to crypto derivatives analytics website coinglass.com, leveraged Bitcoin future positions worth more than $150 million were liquidated on Wednesday.

But short-term Bitcoin bulls can take heart from the fact that the cryptocurrency found strong support in the low $27,000s, as evidenced by recent lows and its 50-Day Moving Average. In fact, a short-term buy signal monitored by Bloomberg fired off one week ago when Bitcoin was changing hands just under $29,000. Historically, BTC gains around 7% within the next 10 days following this trading signal. If history is a good guide, then the Bitcoin price could rally towards $31,000 over the next three days.

Furthermore, Bitcoin’s chances of mounting a sustained recovery above $30,000 in the coming days and weeks are looking increasingly strong. This is because bank crisis fears, which powered Bitcoin higher in March, are back in focus after US bank First Republic revealed $100 billion in customer withdrawals last quarter, sparking renewed fears about the bank’s solvency and the health of the broader pool of regional US banks. As concerns about the health of the US banking sector rise, so do concerns about a contraction in bank lending, which typically lead to recessions.

Recession fears weighed on the US dollar and US yields on Wednesday and may continue to do so, with traders upping their bets for a rate-cutting cycle from the US Federal Reserve later this year. The combination of concerns about a bank crisis and bets on easier financial conditions ahead are major macro tailwinds for Bitcoin right now.

In the short term, traders will be keeping a close eye on upcoming US Q1 GDP, March Core PCE inflation, and Q1 Employment Cost Index data releases for insights into the current state of US growth, inflation, and wage inflation. If they remain robust, this should keep the Fed on course to hike interest rates one more time at its meeting next week. However, the market is much more focused on the coming rate cutting cycle and how aggressive it will be.