Hello Readers,
I hope all of you are doing well in life and enjoying this fresh new week with your loved ones. I hope by now you have already seen that the whole cryptocurrency market has taken a major hit and over a whooping 2.24 billion USD worth of assets have liquidated in just last 24 hours. Bitcoin, Ethereum XRP and even our beloved Hive, all the major crypto tokens have suffered from these sudden sharp declines, with BTC sinking below $95,000 losing over 6%, ETH trading at 2,573$ and losing over 15%, while XRP also is facing a significant downtrend right now. Many of you may be wondering about what actually caused this sudden crash and even more importantly, what will happen in the short-term, is it just a healthy correction or the start of the bear season? Let’s try to find out all these answers in today’s post, so if you are interested, let’s take a dive without any further ado.
Crypto Market in Confusion
As I checked today, the whole crypto market is showing red candles and has lost over 8% of its total valuation within just a single day. This sudden and unexpected news is now sending shockwaves across investors and institutions globally. The initial sharp sell-off has directed investors to panic, with over 730,000 traders getting liquidated today as market sentiment turned bearish suddenly. A major factor behind this unexpected crash as shared in the news is a surprising tariff announcement by U.S. President Donald Trump, which is triggering heavy uncertainty and fear in global financial markets. This is currently constructing a domino effect and after the shock in leveraged trading in the crypto market that led to liquidations and now further causing an accelerated price drop.
Bitcoin is Struggling
Bitcoin, the world’s largest cryptocurrency, dropped around 3% yesterday and hopefully now moving up again while trading with a volume of around $120 billion. Over the past week, BTC has lost 5.61%, and its monthly return stands at -2%.
Technical Indicators- As shared by analysts, the Moving Average Convergence Divergence (MACD) indicator is displaying an increase in red candles, which is pointing toward a rise in bearish momentum. Adding more to it, the 50-day Exponential Moving Average (EMA) is also coming close to crossing below the next key support level, which also hints at downside risks.Potential Price Movement- If the crypto market bulls regain strength, BTC could re-test its $100,000 price point. However, if the current downward continues, we might see Bitcoin dropping toward the $90,000 mark support mark.
Ethereum | The Biggest Liquidation
The case for ETH is even worse, as Ethereum has taken one of the hardest hits today by going down 15.44% in a day with a trading volume of around $91.47 billion. Its last seven-day loss currently stands at 17.11%, while its monthly decline has increased to 28.26%, looking serious I would say. The Relative Strength Index (RSI) is dipping into oversold territory, which is clearly indicating heavy selling pressure. The Simple Moving Average (SMA) is also forming a bearish curve currently, which certainly suggests that there is a lack of any type of buying interest right now. However, analysts suggest that if Ethereum maintains its crucial support level at $2,530, then it has the potential to rebound toward $3,200. However, looking at the current condition it looks hard and instead, if this sell-off keeps happening, it could definitely push ETH down to $2,200.
Ripple (XRP)
Just like BTC or ETH, XRP has also faced an extreme dip lately while following the downtrend, losing over a whooping 15% in a day. Over the past week, XRP has gone down around 20.89% and is down by 3.44% over the last 30 days. The 50-day and 200-day EMA is also showing a strong bearish sentiment, while on the other hand, the MACD indicator is also witnessing a rise in red candles, which also points towards an extended sell-off. Now hopefully, if market conditions improve, XRP could go up and re-test its $3 price point. But on the downside, the ongoing bearish sentiment could drag it down to $2 as well.
The Backside Story
The Role of Liquidations
The recent market crash was largely caused by the massive liquidations, with 84% of the leveraged trading positions being long bets. Traders who were expecting a price rebound got caught in the volatility, resulting in a whopping $1.88 billion in losses.
The Trump Tariffs
Donald Trump’s recent unexpected announcement of applying high tariffs against China, Canada, and Mexico sent a negative sentiment across global markets. In response, investors are washing their hands off risky assets, including crypto tokens of course, which is leading to an even sharper decline in valuations.
Bitcoin ETFs vs. Market Liquidations
Now what is even more interesting, while the whole crypto market witnessed historic liquidations the last day, Bitcoin ETFs still continue to attract institutional investments into this space. Crypto Analysts predict that Bitcoin ETFs will see nearly $50 billion of inflows by 2025, which I think can really change the current scenario of this industry, but one more thing we may see in the near future is a growing divide between institutional and retail investors.
Market Recovery or More Pain?
The Fear & Greed Index has sharply fallen into the "extreme fear" zone, which is quite similar to previous big market crashes during the COVID-19 crisis and the FTX collapse. However, history suggests that such panic-driven sell-offs often create opportunity and the way for strong rebounds. Crypto certainly is and will remain a volatile and unpredictable space. While this crash has wiped out billions, on the other way if we think about it, it has also created opportunities for long-term investors with a comparatively lower entry price. Whether Bitcoin, Ethereum, XRP and Hive will recover soon or not, it totally depends on how global markets respond to ongoing macroeconomic events. Please Note that this is not financial advice and I am not a financial advisor. Please DYOR before investing in Crypto.