Key Points
- The crypto market is in a slump, with liquidations shooting up to $1.3 billion.
- The Fed Chair, Mr. Jerome Powell, ’s comments hinting at a hawkish monetary policy sent shockwaves through the crypto market.
- The decline resulted in leveraged positions being liquidated and forced selling, altogether creating a negative feedback loop.
- Bitcoin plunged to $104,543.68, and Ethereum declined $3,491.68.
- As an emerging market, it’s natural for the crypto market to experience rapid ups and downs; hence, investors are advised to follow prudent investment practices to minimize losses.
The crypto market is in a slump, with liquidations shooting up to $1.3 billion. The crypto market cap has declined to 3.45 trillion. It was 4 trillion back in early October when bitcoin hit its new all-time high of $126k. Despite announcing 25 basis point rate cuts, the Fed Chair, Mr. Jerome Powell’s comments hinting at a hawkish monetary policy shift sent shockwaves through the crypto market.
The macro pressure was reinforced further by the recession fears. The flagship tokens, Bitcoin (B) and Ethereum (ETH), are tumbling amid the mounting selling pressure that followed the crypto market crash.
The Crypto Liquidations & Market Crash Explained
The market crash began when the hopes of further Fed interest rate cuts nearly diminished following the central bank chair Powell’s statement that a further interest rate cut in December is not a “foregone conclusion.”
The investors were looking forward to December interest cuts as the dovish policy enables more liquidity, boosting the risk appetite. On the other hand, a higher interest rate strengthens the dollar, and investors will be pushed towards the traditional investments rather than the riskier crypto market.
The fading hopes about the Fed rate cuts led to the crypto market slump, which is yet to recover from the October 10 record market crash that resulted in wiping out 19 billion leveraged positions, followed by the reignition of geopolitical tensions between the U.S. and China.
The decline led to the forced closure of many highly leveraged long positions, and the heightened selling pressure further plunged the prices, creating a negative loop. The open interest rate fell, suggesting that investors are anxious and are trying to reduce risk exposure. The balancer DeFi hack, resulting in a loss worth 128 million, has added fuel to the fire. The Fear and Greed Index value of 27 reflects the panic. Besides, the 14-day Relative Strength Index has entered into oversold territory, showing the mounting selling pressure.
RSI entering the oversold territory generally suggests that either there is a rebound on the horizon or a prolonged slump. With regards to the current crypto market scenario, both macro and technical conditions are creating a cascading bearish sentiment; a decisive momentum shift will occur only if the macro pressure eases.
Bitcoin Slips to $104K While Ethereum Declines
Bitcoin plunged to $104,543.68 today following a massive liquidation of crypto futures. The crash led to the market cap slipping to 2.08 trillion. Bitcoin failed to hold $105k support level, triggering automated selling. The 24-hour trading volume of BTC has surged past 80% showing the investor anxiety.
The token that had reached an all-time high of $126k briefly closed October with around 5 % contrary to predictions around ‘Uptober’. Ethereum isn’t faring any better; the second-largest cryptocurrency has plunged to $3,491.68. More than a 60% increase in 24-hour trading volume clearly shows the panic-driven exits.
Final Thoughts: What’s Ahead for The Crypto Market?
The crypto market repeatedly faced macro tailwinds ranging from heightened geopolitical tensions to diminishing hopes of Fed rate cuts, creating a cascading selling pressure. The repeated blows have shattered the investor’s confidence, yet, considering the fragile and dynamic nature of the crypto market, a strong macro signal may result in trend reversal.
Despite the backlash, it is worth noting that Bitcoin only has a limited supply of 21 million; the supply cap makes it less vulnerable to crashes in the future. Similarly, the dominant digital currencies, though not yet mainstream, are still considered significant, especially by young investors, and the flood of ETF filings awaiting approval further solidifies their relevance in the broader economy.
As an emerging market, it’s natural for the crypto market to experience rapid ups and downs. Amid such a volatile scenario, the investors are advised to follow prudent investment practices to minimize losses.