Crypto Market Selloff: Here’s Why Bitcoin, ETH, XRP Risk Massive Liquidations

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As a seasoned crypto investor with battle scars from previous market turbulences etched into my trading portfolio, I must admit that the current selloff has me gripping my virtual helm a little tighter than usual. The past 24 hours have been a rollercoaster ride, with over $100 billion in market cap evaporating like morning dew.

The selling pressure in the cryptocurrency market steadily increased due to international developments, economic factors, and technical instability causing fear among investors. Over the past day, the global crypto market experienced a significant drop of over $100 billion, reducing its total value to approximately $2.05 trillion.

As a researcher studying cryptocurrency markets, I observed a significant decline in prices today. Bitcoin plunged over 4%, reaching an intraday low of $58,207, while Ethereum followed suit, dropping approximately 4% to hit $2,513. The top altcoins like Binance Coin (BNB), Solana (SOL), Ripple (XRP), The Open Network (TON), and Cardano (ADA) saw a decrease of around 4-7% within the last 24 hours. Notably, there were substantial selloffs in Artificial Intelligence coins and meme coins as well.

Here are the reasons why the crypto market will remain under pressure and further liquidation may continue in the coming days.

Speculation Over Bank Of Japan Rate Hike Next Year

Despite the Bank of Japan’s confirmation that they won’t increase interest rates this year following financial turbulence, Yen carry trades remain a concern for markets. Financial analysts and traders are bracing themselves for a potential second wave of cryptocurrency market selloffs. This is because people have shifted their investments to cash and Yen carry trades after the launch of the Bitcoin ETF.

Makoto Sakurai, a previous member of the BOJ board, stated that it seems unlikely they will increase rates again before the end of this year. Nevertheless, there is currently ambiguity regarding if the Bank of Japan could potentially raise rates once more in March.

Japan’s Financial Services Agency Commissioner, Hideki Ito, expressed a cautious approach towards the approval of cryptocurrency Exchange-Traded Funds (ETFs), raising concerns over their long-term value and investor protection. This stance was taken during the recent market downturn that ensued following Japan’s interest rate hike.

Geopolitical Tensions, US Recession Fears, and More

The downturn in the cryptocurrency market persists as the Russia-Ukraine conflict escalates, fueled by recent disputes about a blaze at Europe‘s largest nuclear facility. Both Russia and Ukraine have pointed fingers at each other for igniting the fire at the Zaporizhzhia nuclear power plant, which is under Russian control in Ukraine.

Based on recent reports, I am anticipating a potential significant Iranian attack within the next few days. According to The Times of Israel, this might occur even before the resumption of negotiations for a renewed ceasefire and hostage exchange agreement scheduled for Thursday.

While Hindenburg Research accuses the current SEBI Chairperson of holding stakes in mysterious offshore entities tied to the Adani money laundering scandal, this allegation poses potential risks. Madhabi Puri Buch, the SEBI Chief, has refuted these claims. However, Hindenburg Research has now raised doubts on their new post via the X platform, suggesting that Buch’s recent statements might cast critical light on her consulting firms and level of involvement.

Despite reassurances from CEOs and businesspeople about the robustness of the U.S. economy, some economists persist in their concerns about a potential recession. This viewpoint contrasts with the general perception that the American economy is strong and not showing signs of a downturn. Meanwhile, the crypto market is keeping a close eye on this week’s jobs report for additional insights into the health of the labor market.

US Inflation Data May Drive Further Crypto Market Selloff

As a researcher, I’m eagerly anticipating the crucial US economic indicators this week. On Tuesday, I’ll be closely watching the US Producer Price Index (PPI). The following day, Wednesday, I’ll focus on the US Consumer Price Index (CPI) inflation data. Thursday promises a double dose of insights with Initial Jobless Claims and U.S. Retail Sales. These figures will undoubtedly influence the US Federal Reserve’s decisions regarding its monetary policy plans. Lower-than-expected inflation data could potentially halt the crypto market selloff.

Based on the CME FedWatch Tool, it’s estimated that there is approximately a 53.5% chance that the Federal Reserve will lower interest rates by 0.25 percentage points and a slightly lower but still significant 46.5% chance they will reduce rates by 0.50 percentage points during their meeting in September.

According to Bloomberg’s recent poll of economists, approximately 80% of them anticipate that the Federal Reserve will lower interest rates by a quarter-point in September. Additionally, the overall prediction suggests that there is just a 10% chance of an unexpected rate reduction before the September meeting.

According to CoinGlass, the Bitcoin Liquidity/Order Book Heatmap suggests a potential decrease in strength. This might cause Bitcoin’s price to fall as low as $56,800. But if the recovery is robust, we might see Bitcoin testing higher prices. On the other hand, a weak bounce could lead to lower levels. It’s also worth mentioning that a ‘Bitcoin death cross’ could initiate a broader crypto market sell-off.

Crypto Market Selloff: Here’s Why Bitcoin, ETH, XRP Risk Massive Liquidations

Additionally, about $2 billion worth of Bitcoin long positions could be forced to close if the price drops below $58,600, according to data from a BTC exchange liquidation map. Over the past day, approximately 61,000 traders have had their positions closed, resulting in total liquidations exceeding $166 million across top cryptocurrencies. The largest single liquidation order was placed on the crypto exchange OKX for an ETH-USD-SWAP trade worth around $2.17 million.

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2024-08-12 09:48