Crypto Markets Slump as Federal Confidence Wanes and Liquidations Surge
Summary:
Crypto markets experienced a significant drop today, with the total market value decreasing by 5.20% to $2.40 trillion. The significant fall-off leaders were Bitcoin (BTC) and Ether (ETH), which saw reductions of 4.2% and 4.66%, respectively. Factors such as waning confidence in the Federal Reserve's monetary leniency and decreased inflows into Bitcoin spot exchange-traded funds are thought to have contributed. The downturn coincides with a market correction following a state of overvaluation, leading to a wave of liquidations in the derivatives market, particularly of long positions.
Crypto markets plummeted today, as the total market value shrank by 5.20% to a figure of $2.40 trillion, seeing its most severe single-day fall in the past three weeks. The chief offenders in this drop have been Bitcoin (BTC) and Ether (ETH), the market's two most valued coins, which saw declines of 4.2% and 4.66%, respectively.
Several elements are contributing to this market drop, one being the waning confidence in the Federal Reserve's financial leniency following more robust than anticipated US manufacturing data. There has been a decrease in the likelihood of the Federal Reserve easing its policy, as seen in the changes to this year's swap contract prices, which are now around 65 basis points.
This change in sentiment is working alongside the prediction that interest rates will stay high, causing a rise in the 10-year US Treasury yield, from 4.18% to 4.33%. Such an increase often signifies a healthier economy or tighter monetary policies, leading investors to expect higher profits, reducing their risk appetite.
Coinciding with this market decline, the inflow into Bitcoin spot exchange-traded funds (ETFs) in the US has lessened. The net outflow of these funds was approximately $85.7m, suggesting investors are choosing to hold onto their cash or put their funds into less volatile, more traditional assets.
This slump in the crypto market isn't surprising, given the recent overbought state of the market and the correction that started taking place on March 14. The Relative Strength Index (RSI) had soared above the overbought point of 70, indicating overvaluation and decreased trader interest.
The Net Unrealized Profit and Loss (NUPL) metric ascended into the Belief (blue) range, typically predictive of steep corrections or complete bear markets. NUPL values above 0.6 are usually short-lived and followed by significant price corrections.
The decrease in cryptocurrency prices triggered a wave of liquidations in the derivatives market. Long positions worth around $343m were liquidated, exerting downward pressure on asset prices. This news piece doesn't constitute investment advice. Investments and trading moves come with risk, and one should undertake thorough research before making a decision.
Published At
4/2/2024 1:28:27 PM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.