"Trump Trade" Fizzles Out: Bitcoin Plunges Nearly $5,000, Over 260,000 Liquidated

"Trump Trade" Fizzles Out: Bitcoin Plunges Nearly $5,000, Over 260,000 LiquidatedOn November 12th, Bitcoin took a sudden dive after breaking through $90,000, plummeting nearly $5,000 within just three hours. This unexpected drop caught the market off guard and raised questions about the hype surrounding the "Trump trade

"Trump Trade" Fizzles Out: Bitcoin Plunges Nearly $5,000, Over 260,000 Liquidated

On November 12th, Bitcoin took a sudden dive after breaking through $90,000, plummeting nearly $5,000 within just three hours. This unexpected drop caught the market off guard and raised questions about the hype surrounding the "Trump trade."

Data shows that Bitcoin surged to a new all-time high of $90,070.1 within 24 hours before rapidly retracing, hitting a low of $85,500. At the time of writing, Bitcoin price had recovered to $97,579.8. Ethereum also experienced a similar fluctuation, reaching $3,449 before dropping to $3,214, a decline of over $200. Dogecoin followed the same trend.

According to Coinglass data, over 260,000 accounts were liquidated in the past 24 hours, with total losses nearing $1 billion. This figure reflects the intense volatility in market sentiment.

Previously, Bitcoin prices had been constantly hitting record highs, breaking through multiple integer thresholds, and the market's enthusiasm for this digital asset was steadily mounting. Several institutions and analysts expressed optimism about Bitcoin's prospects. Geoff Kendrick, Global Head of Digital Asset Research at Standard Chartered Bank, predicted that Bitcoin would reach $125,000 by the end of this year and $200,000 by the end of 2025 following Trump's victory. Nick Philpott, co-founder of digital asset broker Zodia Markets, also stated that he expects Bitcoin to hit $100,000 in early Q1 next year.

The market generally believed that Trump's election would be a boon for Bitcoin and drive its price upwards. Bitcoin options traders specifically targeted $100,000. According to data from cryptocurrency options exchange Deribit, investors were heavily betting on Bitcoin reaching this milestone by year-end. As of Monday morning, roughly 9,635 Bitcoins (worth around $780 million) were in open contracts betting on Bitcoin touching $100,000 by December 27th, representing the largest trade for that date.

However, it's worth noting that Deribit estimates the probability of this contract making a profit at maturity to be only 18.6%. Nick Foster, founder of Derive decentralized finance protocol, said that while investors have poured significant funds into $100,000 call options, there's considerable uncertainty about whether this trade will succeed.

Some market analysts also pointed out that it remains unclear whether Trump will deliver on his campaign promises about cryptocurrencies, and there has been no tangible progress yet. With potential future changes, traders need to be wary of risks.

Despite the cautious sentiment in the market, the global cryptocurrency market cap has surpassed $3 trillion for the first time since November 2021, driven by Bitcoin. Furthermore, strong investor demand for cryptocurrencies has fueled the rapid growth of related funds. BlackRock's $35 billion iShares Bitcoin Trust fund hit a record daily net inflow of nearly $1.4 billion last Thursday, and its total assets now exceed those of BlackRock's other $33 billion iShares Gold Trust fund. According to Sosovalue data, 12 spot Bitcoin exchange-traded funds (ETFs), including BlackRock's IBIT and Fidelity's FBTC, have recorded a cumulative net inflow of $2.3 billion in the three trading days following November 5th.

Bitcoin's plunge and the shift in market sentiment seem to be cooling the "Trump trade" hype. Investors need to take a rational view of market fluctuations and carefully assess risks.