There is a sea of red in the cryptocurrency market as data from Coinglass reveals that a total of $637.68 million worth of leveraged longs have had their positions liquidated as flagship cryptocurrency asset, Bitcoin lost over $4,000 or 8.80% yesterday, to trade as low as $42,798.
A major catalyst for this bearish movement is as a result of the United States’ ADP National Employment Report which reveals that private sector employment increased by 807,000 jobs from November to December. This is up over 100% from the 400,000-employment forecast according to Investing.com.
The ADP National Employment Report is a measure of the monthly change in private-sector non-farm payroll which is based on the payroll data of approximately 400,000 US business clients. The data is released two days ahead of the government’s Non-Farm Payroll (NFP) data and it is used as a predictor of the government’s Labour Market Report.
A reading that is stronger than forecast is generally bullish for the dollar index, which is a measure of the strength of the United States dollar while a weaker than forecast reading is generally bearish for the U.S dollar.
What you should know
As previously mentioned, the ADP data has given strength to the dollar index thereby forcing the price of Bitcoin to turn bearish as investors take a cautious stance ahead of Friday’s Non-Farm Payroll (NFP) data.
With the current ADP data, those participating in the cryptocurrency market might need to get ready for further downside as predictions for Friday’s NFP data would mean that all assets paired to the US dollar will still see further downside.
Another reason for the downside is the US Federal Reserve (Fed) reconfirming its plans to get its balance sheet under control. Yesterday, the minutes from the Fed’s December FOMC session was released and it revealed that the regulator is committed to decreasing its balance sheet and increasing interest rates in 2022.
Based on the current situation, it is widely expected that the Fed will begin raising its benchmark interest rate in March, which would mean that balance sheet reduction could start before summer.
The overall cryptocurrency market capitalization now stands at $2.21 trillion and Bitcoin’s dominance rate is 39.6%. Investors are advised to trade cautiously as cryptocurrency is a very volatile market.