- The cryptocurrency market capitalization fell 3% to $3.52 trillion, with trading volumes down 25%.
- $250 million in crypto liquidations took place, including $153 million in 12 hours.
- Bitcoin fell 3% to $102,467 and Ethereum fell 3% to $3,220.
The crypto market saw a sharp decline as global market sentiment deteriorated. The crypto market cap fell more than 3% to $3.52 trillion, while trading volumes fell 25% in the past 24 hours. Major cryptocurrencies like Bitcoin, Ethereum, and major altcoins have seen significant price declines with downtrends dominating the market.
Market Sentiments, Liquidations Trigger Massive Sell-Off in Crypto Market
Market volatility increased as liquidations increased, further exacerbating the cryptocurrency sell-off. Data from Coinglass showed $250 million in crypto liquidations over the past day, including $153 million in 12 hours. Bitcoin and Ethereum led the declines, with Bitcoin falling more than 3% to $102,467 and Ethereum falling 3% to $3,220.
The decline came as optimism surrounding Donald Trump’s inauguration faded. Despite anticipation of potential crypto-friendly policies or Bitcoin-related announcements, none materialized during Trump’s speech. To add to the pressure, the US SEC has introduced a new crypto task force, signaling stricter regulatory scrutiny to come.
Bank of Japan’s interest rate hike decision
The Bank of Japan’s upcoming decision to raise interest rates weighed heavily on market sentiment. Analysts expect a rise of 25 basis points to 0.5%, the highest level in 18 years. This potential move threatens global liquidity and risk assets, with cryptocurrencies like Bitcoin historically reacting negatively to such events.
The possibility of unwinding the yen carry trade further frightened investors. Similar scenarios last year triggered a sudden drop in Bitcoin prices during BOJ rate hikes. This impending decision has sparked fears of further selling in the crypto market in the coming days.
US Fed Interest Rate Decision
The upcoming Federal Reserve policy meeting has added another layer of uncertainty to the market. Current projections indicate that there is a 99.5% chance that interest rates will remain between 4.25% and 4.50%. However, rising Treasury yields and a stronger U.S. dollar index have created additional headwinds for cryptocurrencies.
The price of Bitcoin traditionally moves inversely to the dollar index and Treasury yields, making these factors crucial. As the dollar climbs toward 109 and yields hover around 4.6%, traders are bracing for more volatility. Comments from Federal Reserve Chairman Jerome Powell will likely shape market dynamics in the near term.
Expiration of Bitcoin and Ethereum options
Upcoming options expirations have further increased market volatility, with large contracts set to expire this week. Data from Deribit revealed that 29,000 Bitcoin options worth $3 billion will expire, with a put-call ratio of 0.48. Meanwhile, 169,000 Ethereum options worth nearly $500 million are also set to expire, with a maximum pain point higher than current prices.
These expirations often result in erratic price fluctuations as traders adjust their positions. Bearish market sentiment and falling trading volumes suggest that cryptocurrencies could face additional downward pressure. Traders are closely monitoring these developments to gauge the next market movements.
