The crypto market experienced a sharp decline on Tuesday, with the global market capitalization dropping by over 5% from $2.64 trillion to a low of $2.50 trillion. Leading cryptocurrencies Bitcoin (BTC) and Ethereum (ETH) saw a 5% drop within hours, instigating a market-wide sell-off.
Experts from QCP Capital highlighted early warning signs from the options market, particularly the downside skew in risk reversals. They noted that Bitcoin and Ethereum options volatility remained high, accompanied by increased selling pressure due to weak market sentiment. The decline in trading volumes suggests a potential further drop in prices. QCP Capital raises the question of whether this downturn will recalibrate the entire forward curve of cryptocurrency prices.
Other analysts raised concerns about the sustainability of the crypto market’s uptrend after this intra-day correction, citing Bitcoin’s struggle as possibly linked to the anticipated pre-halving drop and the repricing of US interest rate expectations. Altcoins like Solana (SOL), BNB, XRP, and Cardano (ADA) also faced losses, aligning with the broader market trend. Notably, meme coins Dogecoin (DOGE) and Shiba Inu (SHIB) experienced a drop of over 8%, indicating a higher vulnerability in this niche sector.
According to Coinglass data, over $500 million were liquidated across the crypto market during this correction. This included $414 million in long position liquidations and $85 million in short position liquidations in the past 24 hours. The large-scale liquidations, particularly on retail investor-heavy crypto exchanges such as Binance, played a crucial role in driving down prices.
Crypto analyst Ali Martinez had previously warned investors about the critical support level for Bitcoin at $68,300, suggesting that breaching this threshold could lead to a further decline towards the $65,250 to $63,150 range. This range is of psychological significance, considering that 760,000 wallets hold approximately 520,000 BTC.
This downturn in the cryptocurrency market represents a critical moment for investors and analysts alike. With significant market capitalization lost and the looming uncertainty of future trends, the crypto community remains alert to the evolving landscape. As the market grapples with these changes, the need for cautious and informed investment strategies becomes paramount.
