The cryptocurrency market has recently experienced significant turbulence, marked by sharp declines in major crypto assets and heightened volatility. In the past 24 hours, the market has seen Ethereum drop by over 20% and Bitcoin by 11%, with substantial liquidations in the derivatives market amounting to $827 million, including nearly $720 million in long orders. The current market panic index has plummeted to 26, indicating a state of panic among investors.
Gracy Chen, CEO at Bitget, provided insights into the causes and implications of this market downturn. She noted: “In the past 24 hours, major mainstream crypto assets have fallen sharply, with Ethereum down by over 20% and Bitcoin by 11%. The derivatives market has seen a liquidation of $827M including long orders of nearly $720M. The current market panic index has fallen to 26, and the market is in a “panic” mode. There are multiple reasons for the flash crash and bearish behaviour in the market.
The global economy is alerted with geopolitical tensions and the US economy is facing recession pressure. The US stock market has fallen for three consecutive trading days, while the Japanese stock market has been in a circuit-breaker for two consecutive trading days. The panic index VXX soared 27% in a single day indicating the macro financial market is under great pressure for correction, causing wider market selling.
The emotional impact of large institutions’ market actions also play a role, with Berkshire Hathaway cash pile surging after selling Apple and Bank of America stocks in the past 12 trading days. Warren Buffett sold stocks and now holds cash in large quantities, affecting the overall sentiment of the market. On the crypto front, Jump Crypto, a leading market maker in the crypto market, sold ETH, causing the price to fall sharply after analysts bet downfall post ETF approvals.
Judging from historical trends in the crypto market, before the market forms a true bullish drive, it needs to experience a sharp decline to reduce the long positions of the contract in order to reduce the selling pressure for future rises. This is a key factor in the rapid rise of the market, observers can continue to pay attention to changes in the macro market including the panic index indicators. At present, the core key to affecting the market trend is the sentiment index. If VXX starts to fall, it means that the panic sentiment has eased.
Similarly, Shivam Thakral, CEO of BuyUcoin, India’s second-longest-running digital asset exchange, shared his insights on the market’s current state, adding: “The global crypto market has witnessed a significant shift, with a market cap of $1.89 trillion reflecting a 12.29% decrease over the last day. However, Bitcoin has dropped below $50,000. Its dominance has slightly increased to 56.56%, indicating resilience amid the market volatility. The recent decline in Bitcoin’s price is due to a hike in interest rates by central banks around the world, geo-political tension in the Middle East, and concerns related to the US economy, which have affected investor sentiment. However, Bitcoin’s strong market presence reflects that there is potential for recovery and growth as market conditions stabilize.”
