Why Is Crypto Down Today?
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We believe in full transparency with our readers. Some of our content includes affiliate links, and we may earn a commission through these partnerships.Bitcoin and the wider crypto market have enjoyed an incredible run throughout November 2024, which was kickstarted by Donald Trump’s resounding victory in the U.S. Election.
With Bitcoin coming within 1% of the famed $100,000 mark, reaching as high as $99,600, it saw a sudden reversal that has brought it down to a price of $97,043.28 as of today.
Crypto is down today for multiple reasons, including technical resistance, uncertainty in wider financial markets after Trump’s tariff announcements, and mass liquidations.
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Why is Crypto Crashing Today?
Bitcoin’s price is currently $97,043.28 on December 1, 2024, which represents a change of +0.43% in the last 24 hours.
This sudden twist in market sentiment has left many wondering what has caused the sudden reversal in the crypto markets. Here are three key reasons that help to explain this unexpected downturn:
1) Mass Liquidations – $691,000,000 in Last 24 Hours
Major liquidations are usually responsible for significant crypto price drops when they occur, and today was no different. According to CoinGlass, approximately $691 million was liquidated from the crypto markets in the last 24 hours. Out of this, there was $579 million in long positions and $111 million in short positions.
The coins that saw the biggest liquidations included:
- Bitcoin: $179 million
- Ethereum: $95.7 million
- Dogecoin: $43 million
- Solana: $35 million
- XRP: $27 million
While Bitcoin saw the most liquidations, there were also several coins touted as the best altcoins for the next bull run, such as XRP and Dogecoin.
Liquidations occur when traders using leverage are forced to sell due to major price movements against them. Since the markets were performing so well, many traders holding leveraged long positions had their positions wiped out.
2) Traders Brace for Upcoming Economic Indicators
This week will see the release of important economic indicators in the U.S., the results of which will likely see some strong reactions in the markets. As a result, the markets have witnessed some profit-taking amid potential for negative indicators on the back of this week’s data.
Key events to look out for include:
- CB Consumer Confidence Data – Tuesday
- October New Home Sales Data – Tuesday
- FOMC Meetings Minutes – Tuesday
- Q3 2024 GDP Data – Wednesday
- October PCE Inflation Data – Wednesday
It is worth noting that U.S. markets will close for Thanksgiving on Thursday as well, which will add to the uncertainty in the crypto markets.
3) Technical Resistance at the $100,000 Mark
Although Bitcoin came tantalisingly close to hitting $100,000, it’s all-time high currently remains at $99,574.60, as it encountered strong technical resistance as it closed in on this coveted price point.
The $100,000 price point remains a psychological boundary and widespread profit-taking has prevented it from being reached for now.
What Forces Influence Crypto Prices?
Crypto markets can move on a dime, switching from uptrends to sudden drops without warning. Part of the challenge lies in market size. The industry’s relative youth and smaller market capitalization make it more volatile.
For context, the entire crypto market is worth the same as Apple alone, both having a total market cap of $2.56 trillion. As the market evolves, several factors can influence prices going forward.
Supply and Demand
Like all markets, crypto prices answer to supply and demand. If supply outpaces demand, prices fall. When demand exceeds supply, prices rise as buyers compete for purchases.
Market-leading cryptocurrencies, Bitcoin and Ethereum, both benefit from limited supplies. Bitcoin is programmatically limited to 21 million bitcoins.
Ethereum’s supply, while not hard coded, employs a burning mechanism that reduces supply while the consensus protocol mints new ETH. The result has proven to be slightly deflationary.
If long-term demand remains high for these two coins, prices should increase.
Fundamentals
Crypto fundamentals often use different measures compared to stocks. Cryptocurrency investors consider several metrics, including:
- Adoption rates: BTC and ETH are now household names. Both blockchain networks see wide usage across the globe, adding to the “network effect” that makes these assets valuable. Changes in usage and adoption rates can affect prices.
- Transaction volume: Transaction volume plays a vital role in coin and token prices. In addition, total value locked (TVL), a measurement of activity on smart-contract blockchains, becomes an important fundamental measurement that can impact prices.
- Revenue: Mining or staking revenue reflects the health of the network by ensuring decentralized participation in consensus when revenues are strong. In proof-of-stake networks, investors can share in these yields.
- Yields: Beyond proof-of-stake yields, certain crypto tokens act as a ‘key’ to earn yields on decentralized protocols.
- Network security and technology: Bitcoin derives its value from its scarcity, decentralization, and the network’s security. The technology behind a given cryptocurrency leads investors to either embrace or eschew the protocol, ultimately reflecting in the price.
Macro Influences
External factors like interest rates or inflation can affect crypto prices. Bitcoin’s price, in particular, responded to changes in both, because many investors see BTC as a hedge against inflation.
Sentiment
Like other trading markets, the crypto market goes through bull and bear cycles. When market sentiment is bearish, prices can trade sideways or down before reaching a turning point.
Technicals
Chart technicals often play a large role in trading, now magnified by automated trading. Traders worldwide make trading decisions based on technical indicators, which, in a relatively small market, can create a self-fulfilling prophecy.
Is Cryptocurrency Safe to Invest In?
Investing in cryptocurrency comes risks. However, key crypto assets, such as BTC and ETH, have far outperformed traditional investments in the past decade. To reduce risk in crypto investments, consider making crypto a limited part of a larger investment portfolio.
To reduce volatility, use dollar-cost averaging (DCA) to purchase a fixed dollar amount at fixed intervals. This strategy buys more of the asset when prices swoon and smaller amounts when prices spike, often reducing average costs in the long run.
Conclusion: Why Is Crypto Down Today?
Cryptocurrency is down as of December 1, 2024 due to a combination of mass liquidations, uncertainty surrounding upcoming economic indicators, and technical resistance surrounding the $100,000 mark.
Nevertheless, the market remains relatively bullish as a whole and the general consensus is that this was a healthy correction. If you’re looking to buy the dip, Best Wallet offers the easiest interface for buying Bitcoin with a credit card and no verification.
FAQs
What caused Bitcoin to drop today?
Bitcoin’s recent drop is largely attributed to escalating geopolitical tensions and investor panic, leading to widespread sell-offs. Additionally, increased transaction fees from the new Runes protocol and the first conviction in a crypto market manipulation case have also contributed.
Why is the crypto market down today?
The crypto market isn’t down today; instead, it has shown modest gains. This positive shift is driven by a slight increase in the overall cryptocurrency market cap, leading to an upward movement in major cryptocurrencies like Bitcoin and Ethereum.
References
- CoinGlass: Crypto Market Liquidation Data
- Trading Economics: United States Economic Calendar
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