Understanding The Recent $300 Billion Crypto Drop
The cryptocurrency market is experiencing huge turmoil, eliminating a staggering $300 billion in just 24 hours. This massive sell-off has attracted investors’ attention and prompted analysts to explore the root cause of this sharp decline.
Bitcoin and Ethereum Fall
according to To see from Kobelsi letters (Global Capital Markets Commentator), the frequency of “flash crashes” in the cryptocurrency sector has surged since January. These rapid price drops may occur without major bearish news, which confuses investors by sudden volatility.
The recent downturn began with Bitcoin (BTC), initially falling below $95,000. But, in the 30-minute AM, the sharp drop from $95,000 to $90,000 is a wake-up call for traders.
The situation is even worse for Ethereum (ETH), with 37% dropping 37% on February 2, although the trade war headlines have been priced as markets.
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According to analysts, one of the key factors that lead to this crypto volatile is the drastic change in liquidity and temporary positioning in Ethereum. Short positions have soared 40% in a week, and they have soared 500% since November 2024.
This unprecedented short-circuit level on Wall Street Hedging funds Ethereum has caused an instability, and is now worth about $300 billion.
As institutional investors become shorter and shorter, many people turn their attention to Bitcoin, creating a sharp contrast in market dynamics. Although retail interest in Bitcoin has gradually weakened, partly due to the surge in adults, institutional capital continues to flow into Bitcoin, exacerbating the volatility of Altcoins like Solana.
Retail and institutional investors in intensive volatility
Kobelsi further stressed that the current market environment is characterized by polarization between retail and institutional investors. As Liquidity As prices move are becoming increasingly unstable. This leads to a major “air pocket” where emotions can shift dramatically, resulting in rapid price changes.
Recent sentiment analysis shows that the cryptocurrency market has the lowest level of enthusiasm in 2024. Cryptocurrency Fear and Greed IndexPreviously indicated a state of greed, it has now dropped to a 29% fear level. This shift in emotions is often before the flash crashes when traders react to changing landscapes.
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Aside from the complexity of the situation, public figures like Eric Trump have made claims on their views on the biggest crypto assets, Bitcoin and Ethereum. Trump has suggestion These price drops provide buying opportunities, which may affect retail investors’ behavior.
In addition, companies like MicroStrategy have also influenced crypto market dynamics. Although its stock has fallen 45% since the peak on November 20, MicroStrategy continues to accumulate through Bitcoin Convertible instructions The products offered strengthen the commitment to cryptocurrencies and may affect market sentiment.
So far, Ethereum has managed to regain its $2,500 level after falling below $2,300 on Tuesday, recording a 7% loss over a 24-hour timeframe.
Featured images from dall-e, charts from tradingview.com
