As we step into the new year, the cryptocurrency market is already grappling with a significant downturn. On January 7, 2024, the market witnessed a sharp decline, leading to long liquidations that amounted to hundreds of millions of dollars. Bitcoin (BTC), the most prominent digital asset in terms of market capitalization, has experienced a noteworthy drop of over 5%.
$293 Million in Cryptocurrency Liquidations
This dramatic market shift has seen Bitcoin’s value tumble from $102,060 to $96,865 in just a matter of hours. According to on-chain analytics firm Coinglass, this price swing has resulted in liquidations totaling $293 million within a mere four hours. The trend of increasing liquidations suggests that the market downturn might not be nearing its end.
The data indicates that a striking 90% of these liquidations were from long positions, with $266.18 million worth of longs being liquidated. In contrast, short liquidations accounted for $25.7 million. Bitcoin is not alone in this downward spiral; other major cryptocurrencies have also been affected. Ethereum (ETH), Solana (SOL), Dogecoin (DOGE), and Cardano (ADA) have seen their prices fall by 7%, 6.2%, 8.5%, and 8%, respectively. Interestingly, XRP, the native token of Ripple Labs, is defying the trend with a 1.5% increase in value.
Understanding the Causes of the Crypto Crash
You might ask, what has triggered this sudden downturn in the crypto market? The primary catalyst appears to be a significant rise in U.S. Treasury yields over the past decade. This increase has created ripples across the financial markets, including cryptocurrencies. Today, the Institute for Supply Management (ISM) released a report indicating that the December Purchasing Managers’ Index (PMI) for the private sector stood at 54.1, surpassing November’s 52.1.
This data not only impacted the cryptocurrency sphere but also led to a substantial decline in U.S. equities as inflation concerns loomed large. Amidst this economic turbulence, MicroStrategy (MSTR), known as the world’s largest corporate holder of Bitcoin, saw its stock price plummet by over 10%.
As we continue to monitor this volatile market, it remains to be seen how these developments will shape the broader economic landscape. Investors and stakeholders are advised to stay informed and exercise caution during these uncertain times.
