Why is the crypto market down today?

The crypto market is down today as an unexpected sharp sell-off triggered a wave of liquidations in the derivatives market.

• The cryptocurrency market took another hit on July 25, with the total market capitalization dropping by over 3.5% to about $2.31 trillion. This plunge has left many market participants questioning the core catalysts behind this downturn, and how much longer it may continue.
• Let’s look at the factors driving the crypto market down today.

Risk-off sentiment pulls the crypto market down

The crypto market is selling off, mirroring the weakness witnessed in US equities. The US stock market has lost a staggering $1.1 trillion in valuation over the last 24 hours.

The S&P 500 and Nasdaq hit multi-week lows on July 25, with the S&P 500 breaking one of its longest growth streaks with a daily decline of 2%. This highlights the impact of the surge in tech valuations which has left the index exposed to huge volatility in the event of a tech-led sell-off.

The risk-off sentiment being felt has triggered a sharp decline in the US Dollar Index, which fell another 0.3% on July 25.

Meanwhile, US Initial Jobless Claims increased by 235,000 during the week ending July 20, according to the US Department of Labor (DoL) released on July 25. The numbers came in below initial estimates of 238,000 and were lower than the previous weekly gains of 245,000. Additionally, continuing claims decreased by 9,000 to 1.851 million during the week that ended July 13.

The market remains wary of the implications the current could have on the Federal Reserve’s monetary policy. While the Federal Open Market Committee (FOMC) is expected to meet on July 31, there are still low expectations of possible rate cuts in July.

Spot Ethereum outflows weigh down crypto prices

The newly launched US-based spot Ether exchange-traded funds (ETFs) posted outflows on the second day of trading, logging a net outflow of $133.3 million, according to data from Farside Investors.

The new Ethereum investment products were weighed down by another heavy day of selling from the recently converted Grayscale Ethereum Trust (ETHE), which hemorrhaged $326.9 million in outflows.

• Seven of the eight spot ETH ETFs posted net inflows on July 24 with, Fidelity’s Ethereum Fund (FETH) and the Bitwise Ethereum ETF (BITW) leading the pack with the largest net inflows, posting $74.5 million and $29.6 million in new flows, respectively.

$330 million in liquidations rock the crypto market

The outflows coincide with accelerated long liquidations across derivatives markets, overpowering the short ones in the last 24 hours.

Data from Coinglass reveals that long traders—those betting on the crypto market’s upside—have witnessed a total of $301.17 million worth of liquidations in the last 24 hours. In comparison, short traders suffered over $35.10 million in liquidations in the same period.

Ether liquidations reached $125.36 million, with over $117.60 million worth of cumulative leveraged long positions liquidated, according to Coinglass data. Long Bitcoin liquidations stand at $86.51 million, with the tally increasing at the time of publication.

When long positions are liquidated, traders who are betting on prices going up are forced to sell their positions, often at a loss. This increased selling pressure has driven the crypto market valuation lower today.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.