Why is Crypto Crashing? Here’s What Happened

TLDR

• Bitcoin briefly fell to $74,000 before bouncing back above $76,000 in a sharp V-shaped recovery driven by thin market liquidity
• Over $510 million in leveraged positions were liquidated in 12 hours, with long positions accounting for $391.6 million of the losses
• Major altcoins including Ether, BNB, XRP and Solana declined between 4% and 8% as risk appetite weakened across crypto markets
• Weekend trading conditions thinned order books further with institutional desks inactive, making price swings more extreme
• The total crypto market cap dropped $121 billion to $2.51 trillion, holding just above the critical $2.50 trillion support level

Bitcoin fell below $75,000 over the weekend before recovering above $76,000 in volatile trading conditions. The sharp price swing highlighted how reduced market liquidity is making both selloffs and recoveries more extreme.

The cryptocurrency briefly tested $74,000 support before rebounding. This V-shaped price movement came from thin order books where smaller trades can move prices more dramatically than usual.

Markets saw forced selling pressure over a 12-hour period. Liquidations totaled $510 million in leveraged positions across crypto exchanges.

Long positions made up the majority of losses at $391.6 million. Short positions accounted for $118.6 million in liquidations.

The imbalance in liquidations shows traders were positioned for price increases. When Bitcoin dropped, these bullish bets were automatically closed, adding to downward pressure.

Ether led declines among major cryptocurrencies with an 8% drop in 24 hours. BNB, XRP and Solana all fell between 4% and 6%.

Lido’s staked ether followed Ethereum’s decline. Dogecoin and TRON posted smaller losses as risk appetite declined across large-cap tokens.

Thin Market Conditions Amplify Price Moves

The shallow market depth allowed relatively small selling waves to break support levels. The same thin liquidity helped dip buyers push prices back up quickly.

Weekend trading added another factor to Bitcoin’s volatility. Traditional markets were closed and large institutional trading desks remained mostly inactive.

Order books typically thin during weekend periods. This reduction means less capital is needed to move prices through key technical levels.

Under these conditions, Bitcoin behaves more like a leveraged derivative. Funding imbalances and clustered stop orders can dictate price direction for extended periods.

China released manufacturing data that showed mixed results. A private survey indicated slight expansion while the official gauge slipped into contraction.

Beijing’s managed yuan policy limits direct capital flow impacts on Bitcoin. The factory data offers background context but doesn’t act as a direct price catalyst.

Without currency volatility or new stimulus measures, Chinese economic data functions as a stabilizer. It doesn’t provide the momentum needed to drive crypto markets higher.

Market Cap Holds Above Key Support

The total crypto market capitalization fell by $121 billion. The market cap now stands near $2.51 trillion, just above the $2.50 trillion support zone.

Holding this level suggests selling pressure may be easing. A breakdown below $2.50 trillion would likely push markets toward $2.39 trillion support.

Late January saw extreme volatility with nearly $300 billion erased from markets. That movement reflected broader risk aversion across global assets.

Bitcoin’s rebound above the mid-$70,000 range suggests the selloff was primarily a leverage reset. It does not appear to be a fundamental repricing of the asset.

The US Treasury sanctioned two UK-registered crypto exchanges, Zedcex and Zedxion. The platforms processed nearly $1 billion in transactions linked to Iran’s IRGC.

This marks the first time entire digital asset platforms faced blacklisting under Iran-related sanctions. The Treasury cited extensive USDT use on Tron network and ties to sanctioned individuals.

A UAE-backed entity agreed to acquire a 49% stake in Trump-linked World Liberty Financial for $500 million. The deal occurred just days before Trump’s inauguration in January.

The post Why is Crypto Crashing? Here’s What Happened appeared first on CoinCentral.