Why Are Bitcoin and Ethereum Down Today? Reasons Behind Crypto Market Slump

The leading cryptocurrency BTC is having a rough run with a price decline of 0.26% in the past 24 hours. It’s currently trading around $121,608.46. The market cap has decreased to $2.42 trillion. The current downward trajectory came after BTC touched record highs in the past week, riding on the ‘Uptober’ sentiments. Etherium (ETH) is not faring any better; the dominant altcoin saw a price dip of 1.78% in a day. The ETH is presently priced at $4,355.99.

Why the Crypto Market is Down Today?

The overall cryptocurrency market is going through a slump with a decline of 0.67% at the time of writing this article. The market capitalization of the crypto market stands at 4.15 trillion. The present slump is attributed largely to the evolving macroeconomic landscape and crypto market-specific events such as short-term profit-taking.

On the economic side, the U.S. is currently expecting a high inflation rate, and these expectations have dampened the hopes for further rate cuts from the Fed. The Consumer Price Index (CPI) data is expected to be released in mid-October. It’s highly unlikely for the Fed to reduce interest rates against the backdrop of heightened inflation. The crypto market performs well when the interest rates are low, as it can enhance the investor confidence and shift the liquidity towards riskier and higher-rewarding fragile markets such as crypto. The investors usually stick with traditional investment options amid economic uncertainties, such as reeling under higher inflationary pressure. 

The investors, both retail and institutional, are recalibrating their investment strategies, keeping in mind that a Fed rate cut may not be on the horizon. This speculation will strengthen the dollar, but it is sending a bearish signal to the crypto market. Furthermore, from a technical perspective, both BTC and ETH are experiencing backlashes.

The BTC was hit with a strong resistance at $124,000 level, and the subsequent slide to $122K had resulted in liquidations. The wipeout amounted to around $688 million. As for ETH, the flagship token had failed to hold $4,391, and liquidations followed. The profit-taking from the price surges, combined with macroeconomic uncertainties, is fueling the pull-backs. According to crypto analysts, the delayed Exchange Traded Fund approvals from the U.S. Securities and Exchange Commission(SEC) amid an ongoing U.S. government shutdown are another major factor making investors hesitant. As uncertainty looms over Washington, the crypto market is feeling the brunt, and dominant cryptocurrencies are not spared either. The earlier perception of BTC as a safe-haven to hedge against the inflationary pressure seems to be fading as the macroeconomic uncertainties continue to make the U.S dollar stronger.

The general sentiment is pivoting towards less risky investments amid a strengthening dollar driven by unpredictable economic and political circumstances. The tendency is clearly visible via Exchange Traded Fund outflows; ETH, for instance, experienced an outflow worth $8.54 million on October 9th. The other altcoins are not faring any better. The dominant and popular coins, such as Binance Coin (BNB), Solana (SOL), and Ripple-backed XRP, are all down, feeling the heat. 

What’s the Way Ahead for the Leading Crypto Currencies? 

As the flagship cryptocurrencies are tumbling down, the crypto community is not entirely pessimistic. Some of the crypto experts believe that both BTC and ETH will recover soon as their fundamentals remain strong, given that the macroeconomic conditions turn favorable. Historically, October has been a month when BTC becomes stronger. Nevertheless, the investors are recommended to proceed with caution, keeping themselves updated about the latest trends regarding the key market indicators and broader economic and political signals.