Recently, Bitcoin has seen significant declines, hitting lows around $53,400, while altcoins like Ethereum, BNB, and Cardano have also plummeted.
The market has lost over 11% in the past 48 hours, wiping out approximately $250 billion from its total market capitalization.
Several factors have contributed to this downturn, each playing a role in the market’s current state.
Market Data
Bitcoin Price: As of the latest data, Bitcoin has fallen to $53,400, a significant drop from recent highs.
Market Cap: The total crypto market capitalization has dropped by over $250 billion in the last 48 hours, an 11% decline.
Liquidations: Over $680 million worth of cryptocurrencies were liquidated in a single day, affecting over 232,000 traders.
Key Factors Behind Crypto Market Crash
Federal Reserve’s Monetary Policy
One of the primary drivers of the recent crypto market crash is the Federal Reserve’s monetary policy. The Fed’s decision to maintain higher interest rates has significantly impacted investor sentiment.
As interest rates remain high, risk-on assets like cryptocurrencies tend to suffer as investors seek safer, interest-bearing alternatives. The Fed’s stance on potentially delaying interest rate cuts has added to the uncertainty, causing more market volatility.
Government Bitcoin Sales
Both the US and German governments have offloaded significant amounts of Bitcoin.
The US moved 237 BTC from seized funds related to a fraud case, while the German government recently moved over 3,000 BTC to various exchanges, signaling potential sell-offs.
These actions have contributed to downward pressure on Bitcoin prices.
ETF Delays and Regulatory Uncertainty
Investor expectations surrounding the approval of Bitcoin exchange-traded funds (ETFs) have been high, particularly with applications from major financial players like BlackRock and Fidelity.
However, the Securities and Exchange Commission’s (SEC) continued delays in making a decision have dampened market optimism.
Additionally, the regulatory environment remains uncertain, with ongoing lawsuits and charges against major crypto exchanges like Binance, contributing to the market’s bearish sentiment.
Mt. Gox Repayments
The upcoming repayment of $10 billion in BTC and BCH to Mt. Gox creditors has also led to concerns about increased sell pressure, prompting preemptive selling by investors to avoid potential market shocks.
Options Expiry and Liquidations
The crypto market has seen significant liquidations, with $680 million worth of cryptocurrencies liquidated in the last 24 hours alone.
This includes $590 million in long positions and $90 million in short positions. The expiry of 17,500 BTC options, valued at $1.02 billion, has further pressured prices, with a put-call ratio of 0.67 indicating bearish sentiment.
Market Sentiment and Fear
The overall market sentiment has turned negative, with the Crypto Fear and Greed Index dropping back to fear levels.
This negative sentiment is compounded by the declining liquidity of stablecoins like USDT, which traditionally supports Bitcoin growth.
Macro Economic Facts
Broader economic conditions have also played a role. Weak US economic data, including slowing job growth, has increased uncertainty in financial markets.
This has led to reduced liquidity and increased selling pressure in the crypto market.
Analysts’ Insights
Analysts predict that while the current scenario seems bleak, it could offer buying opportunities if the market consolidates at these levels.
However, caution is advised as the market navigates through these turbulent times. Key resistance levels for Bitcoin are around $54,000, with further declines expected if these levels do not hold.
The overall market structure indicates that if current trends continue, further declines may be expected, potentially pushing the crypto market valuation toward the $2.0 trillion mark.
Some experts think this is not the worst. More fear factors are coming towards the market. Investors could see another massive crash. BTC will range between $32,000 to $36,000 if that happens.
The altcoin bloodbath is still on the row if such falling knife scenario happens.
Final Analysis
The recent crypto market crash is driven by a combination of panic selling, macroeconomic factors, significant Bitcoin movements by governments, and large-scale market events like the Mt. Gox repayments and options expiries.
While the short-term outlook appears uncertain, the long-term potential of cryptocurrencies remains a topic of debate among analysts. As always, investors are advised to stay informed and approach the market with caution during such volatile periods.
Author: Mr.OxBull
Article Published: July 5th, 2024
