Cryptocurrency Market Crash Today: Why Bitcoin and Altcoins Are Going Down

The cryptocurrency market is experiencing a sharp price correction as Bitcoin falls below the key support level of $104,000. As a result of the major currency plunges, the altcoin segment is also suffering a fall, with some altcoins recording double-digit falls in the 24 hours.

Volatility and bear runs are not something new to crypto, but the speed at which this fall is currently occurring has left industry experts in shock, as many are suggesting the possible entry into a deep bearish phase. There are, however, optimists who view this as a corrective phase for the long-term gains that have been reaped at this moment.

Analyzing The Sudden Decline of Bitcoin & AltCoins

Bitcoin has dropped a further 3% from the previous day and is currently trading below the key support level of $104,000. Since last week’s high of $115,000, Bitcoin has now dropped nearly 10% in total. Ethereum and other altcoins have faced this bear run in an even harsher manner.

The macroeconomic pressure and the uncertainty regarding the US Federal Reserve’s plans to cut interest rates are among the major reasons why there is such a steep fall. The high interest rates are a negative factor for high-risk assets like Bitcoin. The riskier assets thrive in a low-interest-rate, high-liquidity environment.

During the bear run of risky assets like cryptocurrencies, we see that Bond yields have significantly risen. This is a clear indicator of institutional funds flowing out of risky markets into a more stable environment. Another reason that has catapulted the fall is the strengthening of the US dollar. Since most cryptocurrencies are priced in US dollars, this definitely has an effect on the current drop.

Another reason why Bitcoin is on a downward trajectory is because of the forced liquidations that amount to a total of nearly 1.1 billion US dollars. When sudden forced liquidations and stop losses are triggered, liquidity is largely removed from the market. The market is then driven into a ‘sell’ sentiment without much warning, and the overall price goes down with it.

Since leveraged positions can be easily liquidated at times of extreme volatility, altcoins suffer an even worse condition with limited liquidity and high volatility.

How Technical Breakdowns and Profit Taking Have Affected the Market?

The drop of Bitcoin below the $106,000 structural support was a major reason that caused an inbound fear sentiment. Technical analysis had predicted the price of $106,000 as a stable support zone for Bitcoin, which, if breached, could plummet. This sentiment led to multiple panic sells, vanishing the liquidity and increasing the volatility.

Adding to the psychological issue was the algorithmic trading setups that exited the market as soon as this key support level was breached. Many positions also triggered stop loss events, which also had an effect on the overall price. With more factors pulling downwards, the price plummeted.

Since this month’s substantial high had driven many traders to profit, the existing uncertainty meant that they would exit the market with whatever gains they could pocket. This profit-taking has also created an impact on the market liquidity and price. The profit-taking was uncontrolled and widespread. Analysts refer to this condition as a rotation phase where short-term participants take gains while the long-term participants are now watching from the sidelines.

In contrast to Bitcoin, altcoins suffer disproportionately. When huge bear runs occur in the market, it is often the altcoins that bear the majority of the damage since they have much less liquidity compared to Bitcoin and have a higher volatility.

Cardano(ADA), Avalanche(AVAX), Polkadot(DOT), etc., have dropped significantly. The lesser the liquidity, the more susceptible the coin is to volatility. However, the sentiments for these altcoin markets are derived broadly from the Bitcoin markets. So all the reasons that can drive Bitcoin down can also be attributed to altcoins. Additionally, Altcoins tend to fall sharply (10% or more) since they do not possess the support of institutional backing or high liquidity.

Conclusion

The current crypto market crash reminds us of the volatile nature of cryptocurrencies. The same forces that can cause the prices to touch the sky can drive them down deep into the ground. Speculative leverage, investor sentiment, and macro liquidity are some of the many factors that affect the price of these volatile and high-risk assets.

Even with the help of Institutional backing like Bitcoin ETFs, it was difficult for Bitcoin to maintain its price composure. These are definitive factors that tell us the truth about these risky assets: macroeconomic factors, trader sentiment, and unrealistic trading can all bring down the prices.

The only way to safeguard oneself from the catastrophe of a rapid price drop is to have an approach that is rooted in technical data analysis. This will enable you to set the right stop losses to prevent further damage during an extensive bull run. Drops like these should always remind us that risky assets like cryptocurrencies are not a place for speculative trading.

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