Why is Crypto Falling Now? Liquidation Increases as Bears Take Over Crypto Market

The crypto investors are having a nightmare as the crypto market continues to slump. The market cap has touched 3.39 trillion, down from 4 trillion reached when bitcoin hit a new all-time high in early October.  The Fear and Greed Index value of 22 suggests that the investors continue to walk on a tightrope.

Bitcoin has fallen to $101K and the market cap touched $2.02 trillion. The price of the world’s largest cryptocurrency has fallen around 10% in the past week. The Etherium is struggling at $3,311.14, and the price plunged, registering a 17% weekly loss. The crypto Exchange Traded Fund (ETF) saw a net outflow of $785.80. 

Why is Crypto Falling Now? 

The lingering aftermath of the record October crypto crash, hints of a hawkish policy shift, ongoing U.S government shutdown, and the ‘Uptober’ failing to strengthen the crypto market have resulted in a crypto market downturn.  

Fed rate cuts at the end of October were expected to boost the market sentiment, yet Powell’s comments after the 25 basis point rate cuts led to uncertainty over the upcoming rate cuts and recession fears. The macro jitters following the Fed Reserve Chair Jerome Powell’s statement that the December Fed rate cuts are not a forgone conclusion hit the crypto market hard, which is still reeling under the October 10 crash. The price decline has triggered forced sell-offs. The enhanced whale activity also added fuel to the fire. The cryptomarket’s liquidation reached around $1.3 billion yesterday, as the price plunge has caused forced sell-offs, which in turn created a negative feedback loop. 

The hawkish policy shift has sent a strong bearish signal to the market as a higher interest rate strengthens the dollar. On the contrary, for high-risk markets such as crypto, increased liquidity due to lower interest rates is favourable. The investors are forced to recalibrate their investment strategies to re-risk mode. 

Bitcoin, ETH, and Altcoins Tumble

The Bitcoin failed to hold support levels $107k and is selling below both the 10-day Exponential Moving Average and Simple Moving Average. The 14-day Relative Strength Index (RSI) has decreased to 33. The RSI approaching 30 either signals a rebound or a sustained decline. The next crucial support level for BTC is at around $99,064.

As of Etherium, the token is trading below the 200-day simple moving average, and both market oscillators and moving averages suggest mounting selling pressure. The other flagship tokens are not faring any better; the Ripple-backed XRP fell by around 15% in the past week to hit $2.2. The other popular altcoins, such as Solana and Binance coin, declined by 19% and 15% in the past week. The meme coins, such as Dogecoin, followed suit with a 15% decrease. 

What are Experts Saying About the Crash? What’s Way Ahead?

With bitcoin prices falling, Guillermo Fernandes, the founder of analytics firm Blockpliance, noted that with trade headwinds on the horizon, there was less certainty about future rates and uncertainty as to how the government shutdown would impact that month’s economic numbers; buyers did not have enough data to underwrite market entry points at $120K anymore. The bitcoin’s price movement is crucial as it can affect the whole crypto market. 

Nonetheless, Tom Lee, co-founder of Fundstrat Global Advisors, observed that the market is currently consolidating, and he predicted a bullish scenario with bitcoin hitting $150k and ETH reaching $7000 at the end of the year. Even though his bullish predictions seem to be a bit stretched, many are arguing that the long-term holders have not largely wavered by the crash, and the fundamentals are strong for the flagship tokens.