Why Is Crypto Down Today: Is the Bull Run Losing Momentum?

Why Is The Crypto Market Down Today: Is The Rally Losing Momentum?

Crypto Market Cools After a Stupefying Rally

The cryptocurrency market has seen a dramatic shift as recent momentum begins to ease. The total market cap dropped by $70 billion in the last 24 hours, signaling the start of a pullback after days of significant growth. Despite the gains, the market cap couldn't surpass the critical $3.00 trillion resistance level, sparking renewed caution.

Bitcoin’s First Bearish Close Amid Rally

Bitcoin (BTC), after soaring above 30% over eight days, recorded its first bearish daily close on Tuesday. Monday’s trading ended with a dragonfly Doji candlestick pattern, often an indicator of a short-term price pause. While the broader outlook remains positive, traders should anticipate potential 20-40% corrections, a common aspect of market cycles.

Leveraged Traders Feel the Heat

The market’s pullback has led to substantial liquidations, amounting to over $2 billion over the past three days. The past 24 hours alone accounted for $928 million in liquidations, with long traders bearing the brunt amid rising volatility. This wave has cooled off the short squeeze, pushing many traders to take a more cautious stance. Data from Binance reveals that over 51% of leveraged traders are now shorting, indicating a tempered outlook on immediate recovery.

Sentiment Shift Post-Breakout

Bitcoin’s recent breakout, boosted by Donald Trump’s victory in the U.S., has eased fears of further crypto capitulation. The combined Bitcoin and Ethereum fear and greed index climbed above 80, showing a market driven by extreme greed.

Investors Await US CPI Inflation, Crypto Market Slips

Investors are holding back as they await the highly anticipated US CPI inflation report, set to be released by the Labor Department later today. As a result, the digital asset market, including Bitcoin and other major altcoins, has seen limited trading activity. The global cryptocurrency market cap has dropped to $2.89 trillion, following a brief surge above the $3 trillion mark, a level not seen since 2021.

Crypto Market Rally to Pause?

Although the US CPI inflation is anticipated to exceed expectations, the market still holds out hope for another rate cut by the Fed in December. The CME FedWatch Tool shows a 62% chance of a 25 basis point reduction in December, while the rest of the market anticipates no changes to the Fed's current monetary strategy.

Institutional Confidence and ETF Inflows

Contributing to the market's positive sentiment, U.S. spot Bitcoin ETFs have attracted $8.7 billion in cash inflows over the past month. Institutional interest remains strong, highlighted by MicroStrategy's plan to purchase up to $42 billion worth of Bitcoin, starting with an initial $2 billion investment.