By Tom Blitzer
Key Insights:
- Bitcoin falls to $53,400, dragging altcoins like Ethereum and Cardano down over 15%.
- Panic selling driven by Mt. Gox repayments and government BTC sales fuels market turmoil.
- Macro factors like the Fed’s hawkish stance and options expiry add pressure, triggering major liquidations.
The crypto market has experienced a sharp downturn, with Bitcoin’s price plummeting to $53,400. This decline has triggered a broader selloff across various altcoins, including Ethereum, BNB, Cardano, XRP, and Toncoin, which have all seen drops exceeding 15%. Solana ecosystem tokens, meme coins, and AI-related coins have also declined significantly in the last 48 hours.
According to CoinMarketCap data, BTC traded at $54,373 at press time, having declined 6.92% in the past 24 hours.
BTC/USD 1-day price chart (Source: CoinMarketCap)
Factors contributing to this market turbulence include the impending Mt. Gox repayment, large-scale government Bitcoin sales, a hawkish outlook from the Federal Reserve, and the expiration of numerous options.
Panic Selling and Liquidations
The panic selling has resulted in substantial liquidations across the crypto market. According to data from Coinglass, approximately $680 million worth of cryptocurrencies were liquidated in the last 24 hours. Over 232,000 traders faced liquidations, with the largest single order on the Binance crypto exchange involving ETHUSDT valued at $18.48 million.
The majority of these liquidations involved long positions, totaling nearly $590 million, while short positions accounted for about $90 million. This wave of liquidations has exacerbated the market decline, leading to a loss of over $150 billion in market capitalization within a day. The overall crypto market cap has dropped from $2.24 trillion to $1.99 trillion, officially entering a bear market with a 20% decline.
Government Bitcoin Sales and Market Sentiment
A significant factor in the current market turmoil is the large-scale movement of Bitcoin by the US and German governments. Reports indicate that the US government transferred 237 BTC, related to seized funds from the Potapenko/Turogin case, while the German government moved 1,300 BTC to exchanges such as Bitstamp, Coinbase, and Kraken.
Additionally, Germany transferred 1,700 bitcoins worth approximately $98.76 million to an unknown wallet. These transactions have sparked fears of further selloffs, contributing to the bearish market sentiment.
The fear among investors is further compounded by the upcoming $10 billion repayment of BTC and BCH by Mt. Gox, which has raised concerns about a potential market shake-up. Financial institutions like JPMorgan and CoinShares have issued warnings about the possible impact of these repayments on the crypto market.
Macro Economic Factors
Macro-economic factors have also played a crucial role in the crypto market’s decline. Fed Chair Jerome Powell’s recent speech and the release of the Federal Open Market Committee (FOMC) minutes reaffirmed the Fed’s hawkish stance on interest rates. The expectation of rate cuts this year, coupled with ongoing economic uncertainties, has added to the market’s bearish outlook.
The US dollar index (DXY) remained around 105 on Friday after hitting a three-week low in the previous session. Additionally, the US 10-year Treasury yield dropped to 4.35%, reflecting concerns over a slowing labor market as indicated by the latest ISM and jobs data. These macroeconomic conditions have further contributed to the volatility and downward pressure on the cryptocurrency market.
Options Expiry and Market Projections
Another critical factor influencing the market is the impending expiration of over 17,500 Bitcoin options, valued at approximately $1.02 billion. The put-call ratio of 0.67 and a max pain point of $61,500 suggest that Bitcoin’s price will continue to face selloff pressure. In the past 24 hours, the put/call ratio has risen to over 1.09, indicating a highly bearish sentiment among options traders.
Implied volatility (IV) metrics show significant declines, suggesting uncertain price movements and the potential for Bitcoin to tumble below $52,000. Analysts predict that while the market may see further declines in the short term, a rebound could occur if consolidation happens near current levels. Some experts believe that Bitcoin and altcoins may recover above $58,000 by the end of the week if market conditions stabilize.