Sharp Declines in the Cryptocurrency Market
In recent days, the cryptocurrency markets have undergone significant turmoil due to sudden value losses. Especially the world’s largest cryptocurrency, Bitcoin (BTC), experienced a decline of about 4.5%, dropping to the level of $52,700. This situation has caused panic among investors and led to significant fluctuations across the market.
Reasons for the Decline in Bitcoin Prices
Several key factors lie behind the sharp decline in Bitcoin. First, the employment data released in the U.S. fell short of expectations. Additionally, hawkish statements made by Federal Reserve (FED) officials had a negative impact on the market. These developments reduced investors’ risk appetite, causing them to pull money from many risky assets, particularly cryptocurrencies.
A similar selling pressure was observed in altcoins, with a total of $267 million worth of cryptocurrencies liquidated. A large portion of these liquidations occurred in assets with significant market value, such as Bitcoin and Ethereum. Traders fleeing risky assets increased their anxiety by exiting the market.
Citi Report and Market Developments
A research report published by Citi emphasizes that the cryptocurrency market will continue to show a close correlation with stocks due to upcoming macroeconomic events. The report states that demand for crypto assets has weakened, leading to lower performance of cryptocurrencies compared to other risky assets. Below are the main findings highlighted in the report:
- Increase in Bitcoin Hashrate: The increase in computational power on the Bitcoin network indicates that mining competition is ongoing.
- Declining Demand: There is a noticeable decrease in demand for crypto assets, which negatively affects the performance of cryptocurrencies.
- ETF Outflows: There are net outflows from both Bitcoin and Ethereum ETFs, indicating a decrease in investor interest in cryptocurrencies.
- Stagnation in Blockchain Activities: The decline in activities on Layer 1 blockchains is seen as a sign of the overall slowdown in the market.
- Low Funding Rates: The very low difference between perpetual futures and spot prices indicates that bullish expectations in the market are weak.
- Slowdown in the Mining Sector: Bitcoin miners are turning to consume less energy, and rising production costs indicate a slowdown in the sector.
- Rise of Stablecoins: Despite the overall decline in the market, the market value of stablecoins continues to rise.
Citi analysts predict that with the development of the macroeconomic calendar following the recent Non-Farm Payroll report, the cryptocurrency market will become even more dependent on stock movements. In particular, the FED’s interest rate decisions and economic data could have a significant impact on cryptocurrency prices. Despite all these negative developments, the market value of stablecoins continues to grow. Additionally, the high levels of Bitcoin hashrate indicate that competition among miners is ongoing. However, activities on the Ethereum and Bitcoin networks are generally on a downward trend.
