Bitcoin BTC/USD and Ethereum ETH/USD lead the cryptocurrency market freefall, as experts addressed growing concerns about a global recession.
What Happened: A perfect storm of economic fears, geopolitical tensions, and leveraged positions has sent shockwaves through the digital asset space, with investors fleeing riskier assets.
Bitcoin has plummeted to $50,500 at the time of writing, a whopping 17% drop in 24 hours. Ethereum has dropped 23% to $2,250. The total market capitalization has nosedived by 16.5% to $1.86 trillion.
This dramatic decline has erased a staggering $510 billion in value over just three days, marking one of the most significant sell-offs in recent memory.
What Caused This Crypto Market Crash?
Providing context to the unfolding situation, Scott Tripp, CEO of Neurai told Benzinga that the cryptocurrency market is facing a significant downturn.
“The Crypto Fear and Greed Index has fallen sharply, indicating increased anxiety among market participants. Consequently, both Bitcoin and Ether have reached multi-month lows, pulling the entire crypto market into a severe downturn,” Tripp said.
This decline has been worsened by the liquidation of $919 million in leveraged long positions, according to CoinGlass data.
The catalyst for this market turbulence appears to be a perfect storm of global economic factors and geopolitical tensions.
Last week’s release of U.S. nonfarm payroll data stoked fears of an impending recession, causing investors to retreat from riskier assets.
While some analysts argue that these fears may be premature, the initial emotional response has contributed to the market’s volatility.
Adding fuel to the fire, the Bank of Japan raised interest rates for the first time in over a decade, signaling higher costs for what has long been the world’s cheapest credit.
This move has prompted a reassessment of risk assets’ valuations across global markets, with the cryptocurrency sector feeling the brunt of this shift.
Jonas Kim, Partner at AKIG Family Office said that he feels increasingly encouraged as global affairs continue to impact the cryptocurrency market.
“The more rapid movements in response to the aftermath of the war and fluctuations in the U.S. market indicate that more major institutions are participating in this market,” he added.
Also Read: FBI Issues Alert On Crypto Exchange Impersonation Scams
The Role Of Geopolitics
The geopolitical landscape has further exacerbated market tensions.
Escalating conflicts in the Middle East, particularly between Iran and Israel, have pushed investors towards safe-haven assets, drawing capital away from the cryptocurrency market.
This flight to safety has intensified the downward pressure on digital assets.
Raj A. Kapoor, Founder of the Blockchain Governance Council, elaborated on the multifaceted nature of the current crisis, saying that political volatility is spooking investors and that’s not helping.
“Lace that with geopolitical tensions – rising conflicts are catalyzing this volatility further impacting its stability,” he said.
The technical aspects of the crypto market have also played a significant role in the crash.
A substantial amount of leveraged positions on Ethereum hit their stop-loss thresholds, triggering a chain reaction of price declines.
How Bad Is This Crypto Crash Really?
This cascading effect has rippled through the entire crypto ecosystem, with Bitcoin and Ethereum reaching their lowest levels since February 2024.
In the past 24 hours alone, 278,480 traders have been liquidated, with total liquidations amounting to a staggering $1.06 billion.
Long liquidations accounted for the lion’s share at $901.94 million, while short liquidations totaled $160.00 million.
These figures underscore the severity of the market’s decline and the extent of overleveraged positions.
Bitcoin, which had been trading above $70,000 just a week ago, plummeted to a low of $49,647 in early European trading hours.
At the time of reporting, it was trading around $50,500, representing a 17% drop.
Ethereum, the second-largest cryptocurrency by market cap, fared even worse, falling 23% to $2,250 after touching a low of $2,111.
The carnage wasn’t limited to the top cryptocurrencies.
Across the broader market, altcoins experienced significant losses.
Solana SOL/USD and BNB BNB/USD saw declines of 13% and 16% respectively, while Dogecoin DOGE/USD plummeted 18% and Ripple XRP/USD fell 15%.
What Comes Next For Crypto?
These widespread losses highlight the interconnected nature of the crypto market and the contagion effect of major sell-offs.
Kapoor also pointed to other factors contributing to the market downturn, including the potential distribution of Mt. Gox bitcoins and the broader stock market losses.
“Mt. Gox distributions are not helping, adding more pressure on the market as some recipients are encashing their bitcoins and creating a supply flux sending prices spiraling south,” he pointed out.
As the crypto market grapples with this significant downturn, the Crypto Fear and Greed Index has plummeted, reflecting the increased anxiety among market participants. The index, which measures market sentiment, has shifted dramatically towards extreme fear, a stark contrast to the euphoria that characterized the market just weeks ago.
Looking ahead, Kim cautioned about potential future volatility: “I believe there will be some actions from the U.S. just before the upcoming presidential election. The market has already built a tolerance to the extensive money printing. This means that external factors could have a more significant impact on the market.”
As the cryptocurrency market navigates through this significant downturn, industry experts and investors are eagerly anticipating Benzinga’s Future of Digital Assets event on Nov. 19.
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© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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