Table of Contents
Key Takeaways
- Bitcoin slid to a seven-week low of around $110,000, triggering a wider market retreat.
- More than $900 million in leveraged positions were liquidated in 24 hours, mostly longs.
- Analysts warn of further downside, with BTC possibly retesting $100K and ETH near $4,000.
Bitcoin Declines to Seven-Week-Low as Market Sells Off
The big sell-off on the market continued on Tuesday, bringing Bitcoin (BTC) price down to about $110,000, which is the lowest level in almost two months. This drop in price also affected other tokens, whose values combined were almost 2% lower than the previous total market capitalisation. In a 24-hour period, more than $900 million worth of leveraged positions were liquidated, with the majority from long traders who were not expecting the abrupt drop, as reported by CoinGlass.
GMCI 30 index, an index that measures the top 30 crypto assets’ performance, dropped by 3% on the day, while the losses for Ethereum (ETH) were even more significant. The selloff was caused by a rise in volatility, as the market was waiting for the US macroeconomic data, including the GDP figures, which are scheduled to be released later this week.
Experts’ predictions of prolonged bear market
Experts named a variety of reasons and showed increased risk factors that the fall will be long-lasting. Dr. Sean Dawson from Derive.xyz pointed out that the BTC daily volatility got to 38% from 15%, while the ETH volatility increased from 41% to 70%. The options market sentiment also changed as the 25-delta skew went negative for both BTC and ETH, which shows that the demand for the protection of positions on the downside is rising.
“Among options, the change in pricing indicates the most vigorous demand for security in two weeks”, Dawson told. According to Derive, the chances curves that the next Bitcoin move will be a test of the $100,000 level and that Ethereum would fall to $4,000 in a couple of weeks.
Liquidations and leverage reset uncovered Bitcoin’s vulnerability
However, leverage access is not completely over. Glassnode reported a 2.6% drop in the number of open BTC futures contracts, equalling almost $2 billion, while long-side funding went up 29%. With the assistance of the imbalance, the analysts warn of the risk that momentum might continue on to the bear side and that the market may become unstable.
On-chain data depicted a comparable scenario. Both ways to measure activity on the network – daily active addresses and transfer volumes – showed contrasting trends. While the former went under the trend line, the latter was above with increased volumes due to the volatility-driven reallocations, which reveals that the market is following the footsteps of short-term traders rather than being led by a natural demand.
Timothy Misir, Head of Research at BRN, flagged that if Bitcoin loses support near $103,700 or $100,800, the current bull-cycle structure could be jeopardized.
Corporate Treasuries Still Buying the Dip
Even though the market was in a bad mood, institutional interest was still evident. Strategy announced a buying of 3,081 BTC to the value of $357 million, while BitMine Immersion increased its crypto assets by $2.2 billion last week.
Ethereum also drew in funds, with spot ETH ETFs recording $444 million in daily inflows, outperforming Bitcoin ETFs on Monday. Analysts believe this is indicative of the fact that institutions are holding on to the proposal that Ethereum is the future despite the market that is down.
Fed Policy Adds to Market Jitters
The uncertainty about the U.S. interest rate policy was another reason for the market’s volatility. Although Fed Chair Jerome Powell was quite dovish at Jackson Hole, political developments – like President Donald Trump’s attempt to have Fed Governor Lisa Cook removed – seemed to be raising questions about the central bank’s autonomy.
CME’s FedWatch tool indicates that the probability of rate cut in September has been priced by the traders at 84.3%, however, expectations have been turning quite a lot between 85% and 95% during the past few weeks.
Summary
The cryptocurrency market is feeling the pressure after Bitcoin has plummeted to $110,000. As a result, $900 million of liquidations were triggered. Analysts warn that the decline might get worse, and BTC might even go down to $100,000 while ETH could approach $4,000. However, the corporate treasuries and ETH ETFs are still pulling in institutional cash, which indicates that there is still a lot of confidence in the long term despite the market being volatile in the short term.
Also Read: U.S. Banks Raise Alarm Over GENIUS Act’s Stablecoin Loophole
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