Crypto market at risk as liquidations jump 65% after hawkish Fed

The crypto market is on edge today, June 18, as investors react to the hawkish Federal Reserve decision and the ongoing boom in the stock market. Bitcoin price retreated below $65,000, while the market capitalization of all tokens fell by 3% to $2.2 trillion. 

Some of the top laggards were coins like Audiera, DeXe, SPX6900, SKYAI, Uniswap, and Aerodrome Finance. All these tokens plunged by over 10% on Thursday, paring the gains they made earlier this week.

Crypto market weakness triggers a surge in liquidations

Bitcoin and other altcoins retreated after Kevin Warsh and the team delivered their June interest rate decision. In it, the bank decided to leave interest rates unchanged as was widely expected.

The bank, however, signaled that it may hike interest rates this year to combat inflation that has remained stubbornly above the 2% target. Data released this month showed that the headline CPI and PPI jumped to 4.2% and 6.5%, respectively. 

Crypto prices normally underperform the market whenever the Federal Reserve turns hawkish. This happens because investors often turn to safe-haven assets like dividend stocks and short-term government bonds. 

The ongoing crypto market retreat triggered a surge in liquidations as bullish investors were caught off guard. Liquidations soared by 66% in the last 24 hours to $500 million. Bitcoin positions worth $161 million were wiped out, followed by Ethereum’s $123 million. Some of the other highly liquidated tokens were XRP and Zcash.

The surge in liquidations coincided with the general retreat in futures open interest. This interest dropped by 3.9% in the last 24 hours to over $107 billion.

Rotation from crypto to stocks

The ongoing crypto market weakness is also happening as investors rotate to the booming stock market, where top indices like the Dow Jones, Nasdaq 100, S&P 500, Kospi, and Nikkei have jumped to their record highs amid the AI boom.

In South Korea, the Kospi has soared by over 70% this year, driven by gains in Samsung, SK Hynix, and SK Square. The first two companies crossed the $1 trillion market cap this year because of their role in the AI industry. This surge has driven many South Korean investors from crypto to stocks trading.

The same is happening in Japan, where gains by companies like Kioxia and Softbank have driven key indices to their record highs. Like South Korea, Japan is one of the most active countries in the crypto trading industry.

READ MORE: Uniswap price pumps after a bullish forecast despite the Hyperliquid threat

The ongoing rotation from crypto to stocks is being seen better in the United States. Bitcoin ETFs have experienced a $2.2 billion outflow this month after they lost $2.4 billion last month. These outflows are higher than the inflows experienced in March and April. 

Spot Ethereum ETFs have also shed substantial assets this year. In contrast, top stock ETFs have added billions of dollars in value this year. The Vanguard S&P 500 ETF (VOO) added over $125 billion in assets, with its AUM crossing the $1 trillion milestone.