The crypto market is down today as investors view crypto products funds outflows and the recent LIBRA memecoin scandal as catalysts for bearish market momentum.
While the crypto market is known for its volatility, several concrete factors have contributed to this latest dip, including:
- Liquidations across the crypto market pulling down crypto prices.
- Investors are in risk-off mode amid high outflows from crypto investment products.
- Weakening market technicals hint at further downside.
Solana leads market slump
Today’s crypto market decline is part of a correction that started on Feb. 15, when the Argentina President Javier Milei-endorsed LIBRA token was “rug-pulled,” causing a loss of investor funds.
The sell-off continues on Feb. 18, including:
- Solana
SOL
$171.86
leads the market downturn, 9% over the last 24 hours to trade just below $170. - Bitcoin
BTC
$96,304
and Ether ETH
$2,683
posted moderate losses, down 0.5% and 2%, respectively. - Other top-cap cryptocurrencies such as XRP
XRP
$2.58
, Dogecoin DOGE
$0.2437
, and BNB Chain’s BNB
$655.32
are also down 3.3%, 4% and 2%, respectively.
Compounding the issue are the significant liquidations in the crypto market.
- The sell-off has triggered a cascade of leveraged position closures, with over $280 million in crypto liquidations recorded over the last 24 hours.
- Long SOL leveraged positions totaling $29.75 million were also liquidated on the day.
- This exceeds the $21.4 million in long BTC leveraged position liquidations.
- Over 128,350 traders were liquidated in the past day, with the largest single liquidations taking place on HTX involving an ETH/USDT trade worth $2.65 million.
- A predominance of long liquidations suggests that the crypto market was overleveraged on the bullish side.
Investors de-risk from crypto investment funds
The crypto market’s ongoing correction aligns with the huge capital flows from the crypto investment products.
Key takeaways:
- Digital asset investment products ended a 19-week inflow streak to post their first significant outflows totaling $415 million during the week ending Feb. 14, as per CoinShares report.
- This indicates institutional investors increased their exposure to digital assets.
- Bitcoin bore the brunt of investor outflows, totaling $430 million.
- The year-to-date inflows dropped from $7.4 billion previously to $6.9 billion last week.
CoinShares head of research James Butterfill attributed this to de-risking sentiment surrounding the latest US Consumer Price Index (CPI) data and “hawkish Fed rhetoric.”
“We believe these outflows were triggered by the Congressional meeting with Fed Chair Jerome Powell, who signaled a more hawkish monetary policy stance, coupled with US inflation data exceeding expectations.”
Note that:
- The CPI data for January came in higher than expected.
- This significantly dampened the expectation for multiple rate cuts in 2025.
- The odds of the Fed keeping interest rates unchanged at the March 19 FOMC meetings are now at 97.5%.
Crypto market faces stiff resistance
Today’s drawdown in crypto prices has seen TOTAL—the combined market capitalization of all cryptocurrencies—is part of a correction that started on Jan. 31, which saw the price flip a key support zone into resistance.
Key points to note:
- TOTAL trades below a key resistance level of $3.3 trillion, where 50-day and 100-day simple moving averages (SMAs) appear to converge.
- The relative strength index (RSI) has dropped from overbought conditions at 75 on Jan. 17 to the current level at 40.
- This suggests that the market conditions still favor the downside.
- Further, selling could see the crypto market likely drop toward the $3.03 trillion support.
- Note that this has been a key support for TOTAL since Feb. 6.
