Modified date: January 19, 2024 at 12:16 GMT

Why is the crypto market down today?

After several weeks of upward momentum, the cryptocurrency market has recently seen a notable decline. Its overall market capitalisation has decreased by more than 3% in a single day.

January 19, 2024 at 12:16 GMT

After a few weeks of bullish pressure, the cryptocurrency market has experienced a noticeable downturn, with its market capitalisation sliding down by over 3% daily. 

Analysts attribute this shift to several factors, with a significant one being the diminishing excitement around spot Bitcoin exchange-traded funds (ETFs)

The market is also navigating through the regulatory delays with Ethereum ETF and a significant number of cryptocurrency long liquidations that have all now contributed to the market’s current state.

Enthusiasm for spot ETFs diminishes

The prospect of spot Bitcoin ETFs had generated considerable buzz in the crypto community initially. They were seen as a gateway to bringing more institutional investors into the market. However, as the hype has now subsided, the market is feeling the impact.

The concept of spot ETFs revolves around direct investment in cryptocurrencies rather than derivatives. This direct investment approach was expected to provide a more stable and transparent investment option, attracting a broader range of investors. 

Despite the initial enthusiasm, the fading interest in spot ETFs has contributed to the current market slump. Investors’ anticipation of a surge in institutional participation has not materialised as expected, leading to a recalibration of market expectations.

SEC postpones Ethereum ETF

Adding to the market’s woes is the recent decision by the US Securities and Exchange Commission (SEC) to delay the approval of an Ethereum ETF. This postponement has injected a degree of uncertainty into the market, affecting investor sentiment. 

Similar to its Bitcoin counterpart, Ethereum ETF is viewed as a critical step towards mainstream acceptance of cryptocurrencies. This is because it represents not just an investment in Ethereum but a broader endorsement of the crypto market by regulatory bodies.

While the delay is a setback for Ethereum enthusiasts, it also reflects the regulatory challenges that cryptocurrencies continue to face. 

Coins plunge due to long liquidations

The market’s decline has been further exacerbated by a wave of long liquidations. Cryptocurrencies like Bitcoin, Ethereum, and even meme-inspired Dogecoin have seen significant drops. 

Long liquidations occur when investors are forced to close their positions due to the market moving against their bets. In this case, a large number of traders betting on the price increase of these cryptocurrencies had to face the harsh reality of a market that moved in the opposite direction.

This cascade of liquidations has a compounding effect on the market. As prices drop, more long positions are liquidated, leading to further declines in price. This cycle can create a rapid downward spiral, contributing significantly to the market’s overall decline. 

Analysts have pointed out that over $200 million worth of long crypto positions were liquidated, which is a clear indicator of the market’s volatility.


What’s going on with crypto today?

The global cryptocurrency market capitalisation has dropped from a whopping $1.82 trillion to $1.71 trillion at press time. This made the market suffer a negative shift by about 3% in the last 24 hours. Flagship cryptocurrency Bitcoin ($BTC) was trading at $41,436 as of writing, which is down from its recent high of over $48K when the spot ETFs were approved by the SEC.  

Which coins are down today?

The top loser within the top 100 cryptocurrencies by market cap was Helium ($HNT), which fell by over 10% in the last 24 hours. It was followed by Bonk ($BONK) with an 8.8% daily decrease in price. 

Will crypto market recover?

The cryptocurrency market is known for experiencing significant volatility. Market dips and corrections are common, particularly after a bullish rally. However, a majority of the top coins like Bitcoin and Ethereum were seen trading in the red as bears took over the momentum at press time. Only time will tell the future path of the crypto market.