Why Crypto Market is Down: Main Factors Behind the Crypto Crash?

Why Crypto Market is Down Today: Fed Chair Powell Testimony Impact?

The cryptocurrency market has witnessed a sharp decline today, raising concerns among investors. The global crypto market cap stands at $3.15 trillion, reflecting a 2.33% decrease in the last 24 hours. Despite the downturn, trading activity remains high, with the total market volume reaching $99.91 billion, marking a 3.23% increase.

Among the key reasons behind the recent crypto crash today are significant Bitcoin ETF outflows, large-scale liquidations, and the latest remarks from Fed Chair Powell testimony.

Why Crypto Market is Down? 

Bitcoin ETF Outflows and Liquidation Woes

One of the most significant contributors to the downturn is the outflow from Bitcoin ETFs. Investors have been pulling out substantial amounts, leading to uncertainty in the market. On February 10, Bitcoin ETFs saw withdrawals of $186 million, followed by another $56.7 million on February 11. Major funds like Fidelity, Grayscale, and Invesco led the exits, triggering a sell-off across the board.

Source: SoSoValue

Adding to the pressure, liquidation events have surged in the past 24 hours. 119,784 traders were liquidated, with total liquidations amounting to $226.94 million. The largest single liquidation order occurred on OKX - ETH-USDT-SWAP, valued at $3.03 million. The 12-hour liquidation figures show that $72.18 million in positions were liquidated, with long traders losing $44.70 million and short traders facing $27.48 million in losses.

Such high liquidation levels suggest that leveraged traders are struggling to maintain their positions, further amplifying the downward momentum in the market. As selling pressure intensifies, questions arise: why is crypto crashing today, and will the crypto bloodbath continue?

Fed Chair Powell Testimony and Its Impact on the Market

Another critical factor weighing on the crypto market decline is the latest testimony from Federal Reserve Chair Jerome Powell before the Senate Banking Committee. Powell reaffirmed the Fed’s commitment to controlling inflation, emphasizing that policymakers are not in a rush to cut interest rates.

His statement suggested that financial conditions could remain tight for longer, reducing investor appetite for risk assets, including cryptocurrencies. Powell also confirmed that the U.S. will not introduce a Central Bank Digital Currency (CBDC) under his leadership, aligning with recent political moves against a digital dollar. This regulatory uncertainty has added to market concerns, further influencing the ongoing crypto crash.

Fear and Greed Index Crypto: A Shift Toward Fear

Market sentiment has also taken a hit, as indicated by the Fear and Greed Index crypto, which dropped from Neutral (47) yesterday to Fear (46) today. Last week, the index stood at Neutral (54), and a month ago, it was in the Greed (61) zone. The declining sentiment suggests that investors are growing increasingly cautious.

A lower Fear and Greed Index often signals that traders are uncertain about market stability. Historically, extreme fear has been viewed as a potential buying opportunity, while extreme greed often precedes a market correction. With the market shifting from neutral to fear, many are wondering: why did crypto crash today, and will crypto market recover?

Bitcoin’s dominance increased slightly to 60.34%, indicating that investors may be shifting to more stable assets within the crypto space. However, the sustained ETF outflows, high liquidations, and regulatory uncertainty continue to cloud the market outlook.