Bitcoin and Ethereum, along with the top ten cryptocurrencies by market capitalisation, are experiencing a downturn on Thursday morning. Currently, BTC USDT is trading below $65,000, showing a 2.3% decrease from the previous day, according to Coinmarketcap data. Ethereum’s situation is even worse, with its price dropping by 3.8% to $3,190 within the last 24 hours. This decline mirrors the drop in Lido Staked Ethereum (stETH), an Ethereum liquid staking token.
We take a look at the current state of the market, what is happening with BTC and ETH price, as well as other notable tokens that make the news.
Liquidations and the pressure
Over the past day, falling prices have led to the liquidation of $225 million worth of derivatives contracts, as reported by Coinglass. Approximately $100 million of these liquidations occurred in the last 12 hours.
Liquidation happens when a trader’s position is forcibly closed by an exchange or brokerage due to a margin call or insufficient collateral. This is particularly relevant for leveraged positions, where traders control a larger amount than their deposit—such as managing a $10,000 position with just $1,000 in their account.
Bitcoin has faced three consecutive days of losses, suggesting the possibility of further declines for the world’s largest cryptocurrency. An analyst from a notable trading company mentioned that Bitcoin has ended in the negative for three days straight, with limited resistance from buyers. Ethereum, after a positive Monday, faced strong selling pressure over the past two days. This trend might push Bitcoin down to the $62,500 support level or even $58,000.
Looking ahead, the analyst indicated that BRN’s strategy involves reducing exposure to Bitcoin and Ethereum, aiming to find a better entry point after the price drop.
This market behaviour persists despite the Federal Reserve Chair’s recent comments on interest rates, which were seen as dovish and hinted at possible rate cuts in September. A Singapore-based crypto trading firm noted that a rally in equities, which led to the S&P 500 starting the day 1.6% higher than its Wednesday close, has not impacted the crypto markets. The firm mentioned that crypto experienced a broad sell-off overnight and into the morning, with the market remaining tense as traders monitor daily ETH ETF outflows and additional supply pressures from Mt. Gox and the US government.
Other top cryptocurrencies
Solana (SOL) has decreased by 7.2% to $169.13 since yesterday. The decline is more severe for popular meme coins. Dogwifhat (WIF) dropped 12%, and BONK (BONK) fell 9%. Dogecoin (DOGE), the original meme coin on Ethereum and the only one in CoinGecko’s top ten, has decreased by almost 4% and is currently trading at $0.1205.
XRP (XRP) has dropped to $0.608, which is 8% lower than it was yesterday. Binance’s BNB Coin (BNB) is trading at $571, down 2.5% from the previous day. Toncoin (TON), the native token of The Open Network, has only decreased by 0.5% in the past day. Stablecoins USDC (USDC) and Tether (USDT) remain unchanged, maintaining their 1:1 pegs with the U.S. dollar.
Main moving forces behind the crypto market
The cryptocurrency market is being influenced by several key factors, driving the volatility and price movements observed recently. One of the primary forces is macroeconomic policy, particularly the actions and announcements from major financial institutions like the Federal Reserve. Interest rate changes, inflation data, and economic forecasts can significantly impact investor sentiment. For instance, dovish comments from the Federal Reserve, which suggest potential interest rate cuts, can boost market optimism. Conversely, hawkish stances or unexpected policy tightening can lead to widespread sell-offs as investors seek to mitigate risk.
Market liquidity and trading volume also play crucial roles. High liquidity allows for smoother and more stable price movements, while low liquidity can result in more significant price swings. Recent data shows a considerable volume of liquidations in derivatives markets, indicating that leveraged positions are being forcibly closed, which adds to the downward pressure on prices. This liquidation cascade is often exacerbated during periods of low liquidity, leading to sharp price declines.
Another significant factor is regulatory developments. Governments and regulatory bodies worldwide are increasingly scrutinizing the cryptocurrency market, leading to uncertainty among investors. Announcements of potential regulations, crackdowns on exchanges, or enforcement actions against major players can create fear and uncertainty, driving prices down. On the other hand, clarity and supportive regulations can enhance investor confidence, leading to price appreciation.
Lastly, market sentiment and external events, such as technological advancements, security breaches, or significant partnerships, can cause rapid shifts in prices. For example, news of technological upgrades or successful integrations with mainstream financial systems can drive prices up, while hacks or legal issues faced by major exchanges or platforms can lead to market panic and sell-offs. Additionally, movements in traditional financial markets often correlate with the cryptocurrency market, as broader economic trends influence investor behaviour across asset classes.
