What is the reason behind today’s sharp decline as Bitcoin price experiences a significant drop of 5.60%?

Bitcoin, the leading cryptocurrency in the world, has caused a stir in the crypto market with a significant price drop of 5.60%, bringing its value down to $66,000. This sudden decline has left investors and enthusiasts questioning the reasons behind this sharp fall.

This decline has had a ripple effect across the crypto sphere, as other major cryptocurrencies like Ethereum also experienced a downturn, trading at lows of $3,320.

Several factors contributed to this decline, with one of the primary drivers being the occurrence of significant liquidations, particularly on major crypto exchanges like Binance. In the past 24 hours, a staggering 121,325 traders were liquidated, resulting in a total loss of $395.10 million. However, recent reports from QCP Capital have revealed that perpetual funding rates on these platforms surged to as high as 77% before suddenly dropping.

Another factor to consider is the shift in market sentiment. Prior to the plunge, Bitcoin had been maintaining a comfortable position around the $70,000 mark for the past week. However, on April 1st, Bitcoin spot ETFs experienced a substantial net outflow of $85.84 million, indicating a change in market sentiment. The bearish sentiment surrounding Bitcoin was further fueled by global economic uncertainty, heightened by higher-than-expected inflation rates in the US, which cast doubts on hopes for looser monetary policies and interest rate cuts.

Bitcoin’s historical volatility and the upcoming halving scheduled for April also played significant roles in today’s sharp decline. On March 14, Bitcoin reached an all-time high of $74,120, only to plummet to $66,885, a drop of 9% in a single day. This sudden fall likely prompted traders to secure profits, especially considering Bitcoin’s value had surged by 175% over the past year. Analysts, such as Matt Simpson from City Index, explain that Bitcoin tends to be volatile after hitting record highs, following a pattern where each peak is higher than the last one. This volatility is partly influenced by the upcoming halving in April, which is expected to reduce the creation of new Bitcoins to just 450 per day.

Currently, the price of Bitcoin stands at $66,607, reflecting a 4.3% drop over the past 24 hours. However, amidst this decline, there has been a significant surge in trading volume, skyrocketing by 66.8% to reach $40.5 billion.