Bitcoin, Ethereum, XRP Shed Billions In 9% Correction: 3 Factors Driving The Downturn

As Bitcoin BTC/USD retreats to three-month lows, the 9% correction in total crypto market capitalization has analysts speculating about what is driving this downturn.

What Happened: In a detailed thread on X on Tuesday, macro commentary account Kobeissi Letter described the correction as a liquidity cascade triggered by multiple compounding factors.

The aggressive sell-off in Solana SOL/USD, combined with a broader risk-off move in equities, likely sparked a wave of liquidations across crypto.

Solana is down 17.2% in the past seven days and 44.9% over the past month. Leading meme coins like Trump TRUMP/USD, Bonk BONK/USD and Dogwifhat WIF/USD are down 21%, 17% and 14%, respectively.

According to Kobeissi Letter, the meme coin market losing liquidity is a notable signal, signaling broader risk appetite is fading. CoinGecko data shows the total meme coin market cap down 16.5% over the past 24 hours.

The crypto market has shed close to $1.5 billion in liquidations as part of the market correction.

Interestingly, this market correction comes on the heels of Citadel Securities’ announcement of plans to become a liquidity provider for Bitcoin and crypto. The market seems to have interpreted this as a “sell the news” event.

The recent Bybit hack on Feb. 21 has also dampened market sentiment. Arkham Intelligence has labeled this incident as the “largest financial heist in history,” surpassing even the Central Bank of Iraq theft in 2003.

Price Action: Bitcoin BTC/USD is down 7% over the past 24 hours, trading around $88,800 at the time of writing. Ethereum ETH/USD and XRP XRP/USD are down 9%, trading at $2,415 and $2,22, respectively.

Also Read: Bitcoin Plunges Below $88,000: What Is Going On?

What's Next: Technical factors and a general pullback in risk appetite across financial markets have contributed to the crypto market’s liquidity squeeze.

The Kobeissi Letter notes, “We saw historic levels of risk appetite in 2024 and heading into 2025. A pullback in risk appetite means less liquidity for crypto markets.”

While the current situation may seem alarming, it’s worth noting that Bitcoin has experienced numerous 10% pullbacks during its bull run.

The Kobeissi Letter suggests that “Technical pullbacks are healthy” and doesn’t necessarily indicate a prolonged bear market.

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