Why Is The Crypto Market Down? Key Reasons Behind The Drop

Why Crypto Market Is Down Today: What’s Behind the Crypto Crash?

Bitcoin and Crypto Market Take a Hit After Trump-Induced Surge

The cryptocurrency market has faced significant declines following an initial rally sparked by Donald Trump’s election victory. Bitcoin, which soared to new highs above $93,000, retreated by about 5% to trade below $88,000 on Friday.

Smaller-cap altcoins have been hit harder, experiencing losses between 10% and 20%. This pullback is attributed to a mix of profit-taking, reduced demand from institutional investors, and macroeconomic concerns.

Slowing Institutional Demand Dampens Momentum

Bitcoin's post-election surge initially saw a notable uptick in institutional interest. The US Spot Bitcoin ETF recorded consistent inflows over six consecutive days, boosting market optimism. However, this positive trend reversed on November 14, with the ETF witnessing a substantial outflow of $400.7 million.

Ethereum ETFs also saw their first outflow of $3.24 million since the November 5 election results, suggesting that the renewed excitement in crypto markets might be short-lived.

Profit-Taking Among Whales Pressures Prices

As Bitcoin reached its peak, large-scale investors, or "whales," took advantage of the price surge to secure profits. A recent report by Lookonchain revealed that a whale transferred 1,920 BTC, valued at approximately $169 million, to Binance. Over three days, this whale sold a total of 4,060 BTC, worth around $361 million. This move has put downward pressure on Bitcoin prices, contributing to the market’s dip.

Leveraged Trading and Market Liquidations

Bitcoin’s rapid rise and subsequent pullback had a significant impact on the leveraged trading market. After peaking above $93,000, Bitcoin’s price fell below $88,000, leading to liquidations exceeding $3 billion in total, with $510 million liquidated within the past 24 hours alone. Most of these liquidations were from long traders, further intensifying the sell-off. The shift of many traders to short positions in an effort to minimize losses has created a long squeeze, exacerbating price volatility.

Fed’s Hawkish Stance Raises Caution

Further adding to the cautious market sentiment was Federal Reserve Chair Jerome Powell’s recent speech at a Dallas conference. Powell emphasized the need for a careful approach, saying, “The economy is not sending any signals that we need to be in a hurry to lower rates.”

This hawkish tone lowered the probability of a December rate cut from 83% to 62%, as indicated by the CME FedWatch tool. The shift in expectations has weighed on the appetite for riskier assets, including cryptocurrencies, contributing to Bitcoin’s decline.

Miner Sell-Offs and Market Sentiment

The pressure on Bitcoin’s price has been compounded by increased selling activity from miners. A miner dating back to the Satoshi era offloaded 2,000 BTC, adding to the already fragile sentiment in the market.

US Inflation Data Sparks Volatility in Crypto

Inflation concerns have further rattled the crypto market, with the latest US Producer Price Index (PPI) data showing a 2.4% year-over-year increase, surpassing September’s 1.9%. Monthly PPI figures rose by 0.2%, marking their highest level since August 2024.

The Core PPI saw a significant rise of 0.3% month-over-month, above market predictions of 0.2%. These numbers follow the unexpected increase in the Consumer Price Index (CPI), reinforcing persistent inflation concerns and casting uncertainty over future Federal Reserve policy moves.