Why is today's cryptocurrency market down?

The whole cryptocurrency market is seeing a sharp drop in value as of today, January 7, 2024, leading to protracted liquidations valued at hundreds of millions. Bitcoin (BTC), the largest digital currency in the world by market capitalization, has fallen more than 5% during current market downturn.

Crypto Liquidation of $293 Million

According to the on-chain analytics company Coinglass, this sharp drop in price caused Bitcoin to drop from $102,060 to $96,865 in a matter of hours, resulting in $293 million in liquidations in just four hours. The rising liquidations, however, imply that this price drop might not end yet.

Additional data shows that over 90% of the $293 million in liquidations originated from long positions, with $257 million going to short liquidations and $266.18 million going to long positions.

In addition to Bitcoin, the prices of Ethereum (ETH), Solana (SOL), Dogecoin (DOGE), and Cardano (ADA) fell by 7%, 6.2%, 8.5%, and 8%, respectively. With a 1.5% higher momentum, XRP, the native cryptocurrency of Ripple Labs, looks to be defying the market trend.

Cause of the Crypto Crash

Why the cryptocurrency market is suddenly collapsing may be on your mind. The cause is the significant rise in U.S. Treasury yields throughout the past ten years. The private sector’s December Purchasing Managers’ Index (PMI) was 54.1, up from 52.1 in November, according to a study released today by the Institute for Supply Management (ISM).

Due to worries about inflation, this data not only had an effect on the bitcoin market but also caused a precipitous drop in U.S. stocks. The largest corporate Bitcoin holder in the world, MicroStrategy (MSTR), saw a price drop of more than 10% during this period of fall.

FAQ

What caused the sharp drop in cryptocurrency values today?

The primary cause of the drop is a significant rise in U.S. Treasury yields and economic data showing stronger-than-expected performance in the private sector. These factors heightened inflation concerns and impacted financial markets, including cryptocurrencies.

How much value has been liquidated during this market crash?

According to Coinglass, $293 million in liquidations occurred within four hours, with over 90% coming from long positions. This indicates a substantial shift in market sentiment.

Which cryptocurrencies experienced the most significant declines?

Yes, XRP, the native token of Ripple Labs, showed resilience during this downturn with a 1.5% upward momentum, diverging from the broader market trend.

What role did U.S. economic data play in this crash?

The Institute for Supply Management (ISM) reported an increase in the Purchasing Managers’ Index (PMI) from 52.1 in November to 54.1 in December. This stronger-than-expected economic performance triggered concerns about inflation and led to a ripple effect across the stock and cryptocurrency markets.