Crypto Market Selloff: Experts Reveal Why BTC, ETH, XRP, & Other Altcoins Fell Suddenly

On Tuesday, the crypto market witnessed a sudden decline, with the global crypto market cap plummeting over 4% and Bitcoin (BTC) and Ethereum (ETH) prices tumbling 5% within hours. This market-wide selloff was triggered by weak market sentiment following the largest-ever options expiry and resulted in liquidations exceeding $500 million across the crypto market.

Crypto Market Plunges Amidst Pre-Halving Correction and Options Expiry

The cryptocurrency market witnessed a sharp decline on Tuesday, eroding over 4% of its global market capitalization. The total value plunged from $2.64 trillion to a low of $2.50 trillion, triggering a market-wide selloff. Bitcoin (BTC) and Ethereum (ETH), the two leading cryptocurrencies, lost approximately 5% within hours, further intensifying the downward trajectory.

Altcoins, including Solana (SOL), BNB, XRP, and Cardano (ADA), also experienced significant losses. Meme coins Dogecoin (DOGE) and Shiba Inu (SHIB) failed to maintain their recent gains and dropped over 8%. This broad-based market decline followed the largest-ever options expiry witnessed by the crypto market.

Pre-Halving Market Correction

Analysts have attributed the recent market correction to a pre-halving phenomenon, which has historically preceded Bitcoin halving events. Halving, scheduled to occur in 2024, reduces the issuance rate of new Bitcoins by 50%. Historically, the market has exhibited similar patterns of volatility and price adjustments prior to halving events.

Weak Market Sentiment and Liquidations

The prevailing market sentiment has been negative, particularly since the record-breaking options expiry. Investors have been uncertain and skeptical about the market's trajectory. This weak sentiment, coupled with large liquidations on retail-heavy crypto exchanges like Binance, contributed to the sudden downfall. Binance witnessed perpetuals funding rates drop from a high of 77% to flat, a significant indicator of selling pressure.

Technical Support Breaks

For Bitcoin, the break below the $70,000 mark and subsequent trading below $66,000 raised concerns. Similarly, Ethereum's descent to $3320 lows further weakened the market's overall technical outlook. The breach of crucial support levels, as identified by analysts and traders, spurred a freefall in prices across the crypto space.

Market Data and Liquidation Statistics

Coinglass data revealed extensive liquidations exceeding $500 million during the market correction. Approximately $414 million of long positions were liquidated, while $85 million of short positions faced liquidations over the past 24 hours. Over 139,000 traders were liquidated, with the largest single liquidation order occurring on OKX, where someone converted $7.48 million worth of ETH to USD.

Macroeconomic Factors

The crypto market's performance is also influenced by macroeconomic factors. On Tuesday, the US dollar index (DXY) surged to 105, its highest level since mid-February. This rise coincides with anticipation of key US economic indicators scheduled for release this week. Stronger-than-expected ISM manufacturing PMI data has tempered expectations of a dovish stance from the Federal Reserve (Fed) in June.

Additionally, the US 10-year Treasury yield reached 4.341%, its highest since the start of the year. Hot PCE data diminished optimism about early rate cuts by the Fed, potentially contributing to the overall market volatility.

Expectations for Bitcoin Recovery

Despite the recent downturn, analysts remain optimistic about Bitcoin's trajectory in the long term. Kaiko reported that Bitcoin has historically closed 64% up in the first quarter over the past three years. Spot Bitcoin ETF inflows are also expected to rebound from low levels soon.

Conclusion

The crypto market has experienced a significant correction, driven by a combination of pre-halving dynamics, weak market sentiment, technical support breakages, and macroeconomic influences. Liquidations have been substantial, indicating increased selling pressure. Despite the recent decline, analysts remain hopeful about Bitcoin's long-term prospects and anticipate a market recovery in the future.