Crypto Market Nosedives Amid Stronger Dollar, Increased Liquidations, and GBTC Activity
Summary:
On January 18, the crypto market experienced a 0.63% decline in overall market capitalization, settling at $1.67 trillion. This was due to three primary factors: a stronger U.S. dollar triggering selling pressure on crypto, a surge in market liquidations, and the Grayscale Bitcoin Trust (GBTC) activity contributing to Bitcoin's selling pressure. Despite a mixed market response, investment analyst Michael van de Poppe suggests investors to continue buying dips and hold their investments.
January 18 saw a slide within the crypto market, with an overall market capitalization drop of 0.63%, settling at $1.67 trillion. While there was a slight increase in Bitcoin's (BTC) market dominance, up to 48.85%, the buzz around spot ETFs seemed to wane. The current price of BTC has held its ground above $42,000 this week, with traders ready to snap it up under $40,000, but the influence of Bitcoin ETF approval, at least short-term, seems to have exhausted its impact as the market plateaus.
There are three primary reasons for the crypto market's slump today.
Firstly, a beefed-up U.S. dollar has set off selling pressure on crypto. Market trading volumes across the industry have suffered, with factors including volatility, earning periods, and macroeconomic shifts playing a part. Bitcoin is currently feeling the squeeze as the U.S. Dollar Index rose from 101 in early January to 103.50 on Jan. 18, this move seemingly shrugs off any impact from the 100-day exponential moving average. This dollar growth has been fuelled by a rise in demand and U.S. Treasury yields, which also grew more than anticipated at the end of 2023, showing a 0.6% growth compared to predictions of 0.4% and up from the previous period's 0.3%.
Another reason is the surge in liquidation within the crypto market. Bullish traders seem to have been caught napping, resulting in a spate of long liquidations. The last 24 hours have seen over $137 million in long positions liquidated across the crypto industry, $89 million of which occurred within the previous 12 hours. Such action naturally drives down crypto market prices as long derivative positions are liquidated without necessary offset from trading volume.
Finally, Bitcoin faces selling pressure due to Grayscale Bitcoin Trust (GBTC) activity. The introduction of spot Bitcoin exchange-traded funds was seen on Jan. 10, with trading kicking off two days later. Despite the confusion over the trading volumes on its debut, it achieved a record-breaking volume of $4.66 billion. However, this was not enough to spur on a sustained BTC price rally as many had predicted. GBTC transferred more than $376 million on Jan. 16. This move suggests that GBTC holders are electing to trim their positions.
In the wake of the spot BTC ETF launch, investor sentiment and volatility have simmered down, triggering market consolidation.
Investment analyst Michael van de Poppe of the X social network advises investors not to worry about Bitcoin's negative outlook; instead, he encourages investors to "buy the dip and hold."
This report does not provide investment advice or recommendations. Each investment and trading move carries risk, and readers should undertake independent research before deciding on an action.
Published At
1/18/2024 9:52:12 PM
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