The crypto market faced a sharp decline over the weekend, with Bitcoin (BTC) and Ethereum (ETH) experiencing significant losses. The sell-off, which started during Sunday evening U.S. hours, has led Bitcoin to its lowest level since February and Ethereum to prices not seen since December. This downturn is part of a broader market reaction, fueled by fears of a global recession and rising tensions in the Middle East.
Are Investors Buying the Dip?
Santiment, a crypto analytics platform, reported that while discussions about buying the dip have increased, the response could have been stronger than expected. They noted, “Is this THE dip? Discussions about buying have spiked, but not as much as you may think on such a dramatic drop. Expect the bigger reaction as the US wakes up for their Monday morning shock. Emotional selloffs will only accelerate the timing of crypto’s rebound.”
The selloff affects the whole cryptocurrency market. Bitcoin, dropped sharply during the past day, losing over 16% of its value. As of this writing, it is trading at $51,039.07.
The increased activity during this tumultuous time was reflected in the 147.63% increase in the 24-hour trading volume. Additionally, the value of the global cryptocurrency market dropped, down to $1.1 trillion from above 15%.
The sell-off extended beyond Ethereum and Bitcoin. According to Coinglass data, the whole cryptocurrency market suffered a major liquidation of over $800 million on the previous day. With $700 million in long holdings and $106 million in short positions being liquidated, the majority of these liquidations took place in the last four hours. The huge liquidation played a role in pushing prices lower.
Why is the Market Down Today?
External causes in the traditional financial markets seem to be the cause of this market correction. The Bank of Japan abruptly raised its benchmark interest rate last week, which caused the yen to soar and the Nikkei stock index to plummet. Global investors’ anxieties grew as a result of the Nikkei, which has fallen 20% from its mid-July top and has lost about 15% of its value in the last three sessions.
The Japanese unrest swiftly extended to the American markets. A significant U.S. stock index, the Nasdaq, saw losses of almost 5% in the last two sessions of last week, and on Sunday evening trading, Nasdaq futures saw losses of an additional 2.5%. The duration of the U.S. selloff strengthened the bears’ position.
The latest interest rate stance taken by the U.S. Federal Reserve added to the uncertainties. Even though the Fed chose last week to keep rates unchanged, it gave mixed signals regarding potential rate reduction in the future. The market players were further unsettled by the Fed’s uncertainty because they had been anticipating a rate drop in September.
Bitcoin’s share of the cryptocurrency market has risen to a new yearly high of 58% despite the sharp fall. This suggests that even with the market as a whole in disarray, investors continue to view Bitcoin as a somewhat safer investment than other cryptocurrencies.