The crypto market faced a sell-off as optimism surrounding the inauguration of Donald Trump faded. The global market cap saw a decline of over 3% to $3.52 trillion, while trading volume dropped by 25% in the last 24 hours.
The market leader, Bitcoin, suffered a defeat with a more than 3% dip in price to $102K as the volume of trade during the day compared to the inauguration on Monday dropped three-fold.
Price of Ethereum also witnessed a 3% decline which shows an extension of weakness from the sentiment for the last week.
Furthermore, XRP, Solana and other top altcoins also experienced a decrease in the last 24 hours by around 2-5%. Meme coins like Dogecoin and Shiba Inu dealt with a dip in prices as well during the whale sell-off.
Reasons Why Bitcoin, Ethereum and other Altcoins Crashed
Market Emotions Coupled With Liquidations Triggered Crypto Market Sell-offAccording to Coinglass, crypto market liquidations were around $250 million, with $153 million worth of liquidations
Taking place within the last 12 hours. In the last 24 hours, over 107K traders were liquidated with the biggest single liquidation of BTCUSDT amounting to $5.93 million on the crypto exchange, OKX.
BTC, SOL, ETH, DOGE, TRUMP, and XRP claims were Liquidated to such an extent that it added to the larger sell off in the entire crypto market.
The sell off in the market was caused by the fact that Trump did not touch upon any mention of crypto or Bitcoin in his speech which has already positive sentiments.
Participants from the industry were also intricately watching the executive order on strategic Bitcoin reserves or the new crypto policy. Meanwhile, the United States SEC alongside Commissioner Hester Peirce announced the creation of a Crypto Task Force which will provide guidance on regulating crypto assets.
The Bank of Japan Interest Rate Change Strategy
The Bank of Japan is anticipated to increase the interest rates to their highest level in 18 years. Increasing by 25 basis points to 0.5% by the BOJ can lead to the Yen carry trade unwind which can result in liquidity problems in the global economy as well as risking assets like Bitcoin.
With this hike, crypto market selloffs can be seen as a huge portion of optimism surrounding Trump trade, as well as Trump branded meme coins, could be lost. Yearly BTC plummeting has been witnessed while BOJ rate increases were implemented last year.
Decision of Interest Rate of the US Federal Reserve
The market this year will be heavily influenced by the US Federal Reserve economic policy assessment and resumed engagement with Jerome Powell. Recent immigration and a powerful employment market have eliminated options for the Fed rate cut at the FOMC Meeting.
As per the CME FedWatch tool, the likelihood the us Federal reserve will not change the rate of interest during the get together on January 29, 2023 lies at 99.5%. The opinion stems due to inflation reducing to a rate above 4.25% but under 4.50%.
Simultaneously, the US dollar index, or DXY, has resumed its upward movement towards 109, recording 108.38 today, which is a 0.22% increase. Also, amid the volatility from the Trump tariff and other policy changes, the benchmark 10-year Treasury yield remains close to 4.6%. Usually, the price of Bitcoin is inversely proportional to DXY and the Treasury yield.
Crypto market Sell Off, Expiration of Bitcoin and Ethereum Options
Deribit reports suggest, 29K BTC option contracts, with notional amounts of $3B stand to expire plus a put-call ratio currently sits at 0.48. The max pain point is sitting at $99,000,
Indicating a high for yet another drop below the $100K mark. As has been common, price movements tend to be unusually volatile during options expiry, and this instance should not be an expectation.
BTC is currently trading at $102,467 with the 24-hour high sitting at $105,557, marking a loss of around 3%.
Furthermore, of the 169K ETH options with a notional value of around $0.5 billion, approximately 169K ETH options have also been noted to have a put-call ratio of 0.47 and are set to expire alongside the previous ETH options.
The max pain point is set to 3300 which occurs after the current price of 3220. These traders should be cautious of significant drops in trading volumes as they would indicate a further plunge in ETH prices.
