- Crypto market cap dropped 3% to $3.52 trillion with 25% decline in trading volumes.
- $250 million in crypto liquidations occurred, with $153 million happening in 12 hours.
- Bitcoin fell 3% to $102,467 and Ethereum dropped 3% to $3,220.
The crypto market experienced a sharp selloff as global market sentiment turned sour. The crypto market cap dropped over 3% to $3.52 trillion, while trading volumes fell 25% in the last 24 hours. Leading cryptocurrencies like Bitcoin, Ethereum, and major altcoins saw significant price declines, with bearish trends dominating the market.
Market Sentiments and Liquidations Trigger Crypto Market Selloff
Market volatility surged as liquidations mounted, further exacerbating the crypto selloff. Data from Coinglass showed $250 million worth of crypto liquidations in the past day, with $153 million occurring within 12 hours. Bitcoin and Ethereum led the declines, with Bitcoin dipping over 3% to $102,467 and Ethereum falling 3% to $3,220.
The decline came as optimism surrounding Donald Trump’s inauguration faded. Despite anticipating potential crypto-friendly policies or Bitcoin-related announcements, none materialized during Trump’s speech. Adding to the pressure, the U.S. SEC introduced a new Crypto Task Force, signaling tighter regulatory scrutiny ahead.
Bank of Japan’s Interest Rate Hike Decision
The Bank of Japan’s upcoming decision to raise interest rates weighed heavily on market sentiment. Analysts expect a 25 basis point hike to 0.5%, the highest level in 18 years. This potential move threatens global liquidity and risk assets, with cryptocurrencies like Bitcoin historically reacting negatively to such events.
The possibility of unwinding the yen carry trade further spooked investors. Similar scenarios last year triggered sudden drops in Bitcoin prices during BOJ rate hikes. This looming decision has sparked fears of further selloffs across the crypto market in the coming days.
U.S. Fed Interest Rate Decision
The Federal Reserve’s upcoming policy meeting added another layer of uncertainty to the market. Current projections indicate a 99.5% chance of interest rates remaining at 4.25%-4.50%. However, rising Treasury yields and a stronger U.S. dollar index have created additional headwinds for cryptocurrencies.
Bitcoin’s price traditionally moves inversely to the dollar index and Treasury yields, making these factors critical. As the dollar climbs toward 109 and yields hover near 4.6%, traders brace for more volatility. Federal Reserve Chairman Jerome Powell’s comments will likely shape market dynamics in the near term.
Bitcoin and Ethereum Options Expiry
Upcoming options expirations further heightened market volatility, with significant contracts set to expire this week. Deribit data revealed that 29,000 Bitcoin options worth $3 billion will expire, with a put-call ratio of 0.48. Meanwhile, 169,000 Ethereum options worth nearly $500 million are also nearing expiry, with a max pain point higher than current prices.
These expirations often lead to erratic price swings as traders adjust positions. The market’s bearish sentiment and declining trading volumes suggest cryptocurrencies could face additional downward pressure. Traders are closely watching these developments to gauge the next market move.