Why Crypto Market Is Down Today: What's Driving the Decline?

Why Is The Crypto Market Down Today: What Next For Bitcoin And Altcoin

Bitcoin’s Bearish Candle Breaks Positive Streak

After six consecutive days of gains, Bitcoin formed a bearish candle on heavy trading volume yesterday. This marked a reversal in market sentiment, as the world’s largest cryptocurrency by market capitalization fell sharply, dragging the overall market with it.

Crypto Fear & Greed Index Drops

Despite hitting "Extreme Greed" levels (78) yesterday, the Fear & Greed Index dipped to a lower "Greed" score (70) today, indicating a shift in market sentiment. This decline suggests that profit-taking, market corrections, or external economic factors could be weighing heavily on investor confidence.

Massive Liquidations Hit the Market

In the past 24 hours, the cryptocurrency market witnessed 193,640 traders liquidated, amounting to $607.68 million in total liquidations. Notably, long positions accounted for over 90% of these liquidations, with $548.55 million wiped out, compared to $59.13 million from short positions. The rising liquidation levels hint at the possibility of further declines, as traders struggle to maintain positions amid heightened volatility.

Long/Short Ratio

According to Ali's post on X, 61.28% of Binance traders with open Bitcoin ($BTC) positions are optimistic about its price rising.

Key Levels for Bitcoin Rebound

If Bitcoin attempts to rebound, significant liquidations could occur at key price levels. A rise to $97,410 could liquidate $60.10 million, while surpassing $98,932 may trigger an additional $101.22 million in liquidations. This highlights the intense pressure on both buyers and sellers in the current market environment.

Factors Behind the Crypto Crash

1. Strong U.S. Economic Data

The crash follows robust economic reports from the United States. The December Purchasing Managers’ Index (PMI) for the private sector rose to 54.1, surpassing November's 52.1, signaling economic strength. This data diminished hopes for an imminent Federal Reserve rate cut, adding downward pressure to risk assets like cryptocurrencies.

2. Rising U.S. Treasury Yields

Bond yields surged significantly, with the 10-year U.S. Treasury yield climbing to 4.70%. Similarly, 30-year and 5-year yields increased to 4.61% and 4.50%, respectively. These rising yields often lead investors to shift toward safer assets, negatively impacting high-risk markets like crypto.

Record ETF Outflows Amid Price Pressure

Bitcoin ETFs recorded their largest single-day outflows, with $543.72 million pulled from the market. Ethereum ETFs also saw substantial outflows of $86.79 million. The sell-off comes amid fears of tightening monetary policy and reflects reduced investor confidence in digital assets.