coindesk.com
The cryptocurrency market saw a sudden burst of volatility Tuesday, with bitcoin (BTC) climbing above $73,000 for the first time ever before suddenly slipping nearly 6% from those levels, before modestly rebounding.
At press time, bitcoin was changing hands at $71,150, down about 2% over the past 24 hours and outperforming the CoinDesk 20 Index's (CD20) 3% drop.
Ether (ETH) was also outperforming with a 2% decline, while ripple (XRP), dogecoin and litecoin (LTC) tumbled 6%-8%.
Avalanche's native token (AVAX) was the only notable gainer among the CoinDesk 20 constituents, up 15% for the day.
The volatility liquidated over $360 million worth of leveraged derivatives positions across all cryptos, mostly longs betting on rising prices, CoinGlass data shows. This was the largest long flush-out since the March 5 correction.
Crypto investment services firm Matrixport noted in a Tuesday market update that bitcoin's rally was showing signs of waning momentum.
The report highlighted the divergence between high BTC prices and declining relative strength index (RSI), a widely followed momentum indicator based on the speed and size of price changes for an asset.
"We have been bullish on bitcoin since the end of January, but the risk-reward analysis favors a period of consolidation," Matrixport analysts said. "This bull market still has legs, but the divergence between a declining RSI and still high Bitcoin prices could signal that Bitcoin needs to consolidate before rallying again.
The $69,000 area is a key price level for bitcoin, reminiscent of its 2021 bull market peak, where prices could find short-term support.
U.S. inflation in February was hotter than hoped earlier Tuesday, with the Consumer Price Index (CPI) rising 3.2%, slightly higher than analyst expectations. Sticky inflation this year could discourage the Federal Reserve from cutting interest rates.
Aurelie Barthere, principal research analyst at Nansen.ai, said the inflation reading is only a short-term blip for cryptocurrencies, and is unlikely to impact the bull market over the coming weeks.
"There is too much bullish momentum in crypto," Barthere said in an emailed note. "What will probably happen is a repricing of expected Fed rate cuts. We do not expect a significant sell-off for crypto as this repricing has happened in the past few months without questioning the bull market."