A dramatic sell-off has sent the cryptocurrency market into a frenzy as investors are caught off guard. Global economic factors, along with technical indicators flashing red, created market-wide panic. Total market capitalization has tumbled below the crucial $2.05 trillion mark, reminding us of the industry's vulnerability.
Major altcoins such as BNB, SOL, XRP, TON, and ADA fell 4-7%, while Bitcoin and Ethereum fell more than 4%. AI and meme coins suffered the most.
Despite Bitcoin's $49,000 drop, it remains in the $50,000 to $60,000 range, reflecting ongoing uncertainty. The main question now is whether Bitcoin and altcoins can withstand these pressures.
Understanding the market sell-off
The Bank of Japan is stable
Amid market turmoil, the Bank of Japan (BOJ) has decided not to raise interest rates this year, although a rate hike could happen next March. This uncertainty has created panic, particularly in yen carry trades, which historically lead to global market volatility. As traders brace for more volatility, speculation surrounding the BOJ's actions has fueled fear, uncertainty and doubt (FUD) in the market.
Geopolitical tensions are on the rise
The ongoing Russia-Ukraine conflict continues to create instability, made worse by concerns about a fire at Europe's largest nuclear power plant. Additionally, reports suggest that Israel is preparing for a possible major Iranian attack, which adds another layer of risk. In India, allegations against Sebi's chairperson regarding offshore entities linked to the Adani scam have further shaken investor confidence.
In the US, fears of a recession persist despite some optimism among economists and business leaders about the economy's resilience. This uncertainty keeps the crypto market on edge, with investors wary of a potential slowdown.
The US Inflation data is in the center
This week, key US economic indicators will be closely watched. Data on producer price index (PPI), consumer price index (CPI), initial jobless claims and retail sales will be released on Tuesday, Wednesday and Thursday.
A Bloomberg survey suggests the Federal Reserve could cut interest rates by 25 or 50 basis points in September, depending on the data. Depending on inflation trends, these signals can stabilize or further destabilize crypto markets.
It's getting tough! More crashes to come?
Don't forget Bitcoin which is facing significant liquidity challenges which can cause short-term fluctuations in the market. The BTC liquidity/orderbook heatmap also suggests a possible further decline, possibly to $56,800. The market is particularly concerned about a potential "death cross," a technical pattern that could trigger further selling.
The risk of a large-scale liquidation is also high, with nearly $2 billion in bitcoin at risk if the price falls below $58,600. In the past 24 hours, more than 61,000 traders have been liquidated, with total liquidations in major cryptocurrencies exceeding $166 million. There was significant liquidation on OKX, where $2.17 million worth of ETH was traded.
Geopolitical tensions are on the rise
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