The cryptocurrency market witnessed a decline today, triggered by a mixture of factors, including significant fund outflows from crypto products and the recent controversy surrounding the LIBRA memecoin. This downward trend led to a 2% decrease in total market capitalization, now standing at approximately $3.13 trillion as of February 18.
Several key elements have led to the market’s bearish momentum:
- A series of liquidations have caused crypto prices to fall.
- Investors have adopted a risk-off approach due to substantial outflows from crypto investment products.
- Market technicals are showing signs of potential further declines in value.
A notable part of the current downturn involves Solana, which has taken a significant hit. Since February 15, after the rug-pulling incident involving the LIBRA token, Solana’s value dropped by 9% and is now trading under $170. Similarly, Bitcoin and Ethereum experienced modest losses of 0.5% and 2% respectively, while other major cryptocurrencies such as XRP, Dogecoin, and BNB Chain’s BNB also faced reductions in their values.
The cascading market effect was exacerbated by large-scale liquidations, with over $280 million noted in the last 24 hours alone. Solana saw $29.75 million in long positions liquidated, more than the $21.4 million experienced by Bitcoin. Across the board, over 128,350 traders were liquidated, with the largest being an Ethereum trade valued at $2.65 million.
Investor sentiment has driven them to pull back on crypto investment funds. This followed the end of a 19-week streak of inflows, as noted in a CoinShares report. The week ending February 14 saw $415 million in outflows, reflecting institutional investors reducing their digital asset holdings. This reduction was influenced by the recent US Consumer Price Index data and statements from Federal Reserve Chair Jerome Powell, which signaled a more aggressive stance on monetary policy.
The CPI for January was higher than expected, affecting assumptions regarding upcoming rate cuts and pushing the likelihood of unchanged rates at the March 19 Federal Open Market Committee meeting to 97.5%. There remains a 44.3% chance for a potential rate cut as early as July.
The cryptocurrency market is encountering substantial resistance. Since January 31, TOTAL—an aggregate of all cryptocurrency market capitalizations—slipped below a major resistance level of $3.3 trillion. Indicators such as the Relative Strength Index have reduced from overbought levels in January to 40, suggesting bearish conditions prevail and could lead the market closer to the $3.03 trillion support level. However, a recovery in buying activity could boost the market back above $3.2 trillion to face the $3.3 trillion resistance.
Investor sentiment, measured by the Fear and Greed Index, reflects a cautious market mood at a value of 35. This could pose opportunities for those interested in entering while the market is subdued. Nonetheless, it remains imperative for investors to conduct thorough research before making any decisions, considering the inherent risks associated with cryptocurrency trading.
