The cryptocurrency market was heavily shaken during early trading in Asia on Friday, as the total market capitalization 'evaporated' nearly 4%, dropping from $3.87 trillion to $3.74 trillion.
Bitcoin lost 3% of its value, sliding below the $115,000 mark. Ethereum (ETH) fell even more sharply, down over 6% and currently trading around $3,600, amid rapidly increasing selling pressure.
The correction wave has also swept through the altcoin group, with XRP, BNB, Solana, Cardano, and SUI all losing value between 7% and 12%. Not escaping the negative trend, meme coins like Dogecoin, Shiba Inu, and Pepe Coin also fell more than 10%.
The Crypto Fear & Greed Index has dropped from 72 to 65. Although still in the 'greed' zone, it is clear that investor enthusiasm is showing signs of wavering.
5 Reasons Why the Cryptocurrency Market Is Experiencing Strong Corrections
A series of adverse factors have dealt a strong blow to the market, igniting a selling wave from both individual and institutional investors. Below are the 5 main reasons behind this dramatic plunge:
1. Macro Factors and Tariffs Leading to the Market Crash
The core PCE index — the Fed's preferred measure of inflation — rose by 0.3% compared to the previous month, pushing the annual inflation rate to 2.6%. Meanwhile, the CPI index in the U.S. also accelerated to 2.7%, indicating that price pressures have not yet eased.
At the same time, the U.S. labor market remains stable, leading investors to expect that the Federal Reserve (FOMC) will soon provide new signals. However, the FOMC still maintains the current interest rate at 4.25%–4.50%.
Fed Chairman Jerome Powell emphasized that the impact of tariffs on inflation has been clearly reflected in recent reports. According to data from the CME FedWatch tool, the chance of the Fed cutting interest rates by 25 basis points is only forecasted to occur once before the end of this year.
Notably, on August 1, President Donald Trump declared that the Federal Reserve Board would be forced to act if Powell continued to delay interest rate cuts.
2. Over $7 Billion in Bitcoin and Ethereum Options Expiry
The cryptocurrency market often becomes cautious whenever Bitcoin and Ethereum options contracts enter the expiry phase — and this time is no exception. Notably, traders have made significant adjustments to their positions after the Deribit platform recorded the largest volume of Bitcoin put options ever, aiming to pull BTC prices below the $110,000 threshold before August 8.
Specifically, Bitcoin options contracts worth a nominal value of up to $5.72 billion expired on Deribit today. At the same time, Ethereum options contracts with a total value of $1.35 billion also officially expired.
Under increasing selling pressure, Bitcoin's price has slid below the 'max pain' level at $16,000, causing a series of investors to be liquidated or forced to close positions passively.
3. Outflow of Capital from Bitcoin Spot ETF Funds and Related Funds
Spot Bitcoin ETF funds witnessed outflows of up to $114.8 million on Thursday. Meanwhile, BlackRock's IBIT fund recorded a modest inflow of $18.6 million.
Funds such as Fidelity’s FBTC, ARK 21Shares' ARKB, and Grayscale's GBTC reported outflows of $53.6 million, $89.9 million, and $9.2 million respectively.
Notably, the latest data from CoinShares shows that the inflow of capital into global Bitcoin funds has almost been completely wiped out, recording $175 million withdrawn. This reflects a rotation of capital and selling activity from the institutional block.
Analyst Ali Martinez predicts that the next support level for Bitcoin is $107,000, after breaking the important support level at $116,950 during the recent plunge.
4. Massive Sell-off and Large-scale Liquidation in the Market
According to data from CoinGlass, the cryptocurrency market has just experienced a 'liquidation storm' with a total value of nearly $1 billion, causing nearly 200,000 traders to face 'account liquidations' within just 24 hours.
The largest single liquidation recorded was the ETH/USDC pair on Binance, valued at up to $13.79 million.
Of the total assets liquidated, approximately $900 million came from long positions and over $100 million from short positions. The altcoins that suffered the most include SOL, XRP, DOGE, SUI, ENA, and ADA.
This large-scale liquidation has triggered a widespread selling wave across the market. Notably, tokens from the Ethereum and Solana ecosystems have been the two groups of assets most affected in the past 24 hours.
5. Signals from On-chain Data
The percentage of Bitcoin supply in profit has continued to stay above 90% for over a month — a signal indicating that most investors are currently in profit. However, according to analysis from Glassnode, this increases the risk of mass profit-taking.
Glassnode warns that the 'Cumulative Mean +1 Standard Deviation' index is currently fluctuating around 91% — an important technical threshold. If this level is broken downwards, it could signal a warning for a new wave of selling.
Additionally, the Bitcoin price spread on Coinbase (Coinbase Premium Gap) has turned negative in recent days, indicating that buying pressure from the U.S. market is weakening. Meanwhile, the 'Kimchi Premium' — the price difference between Korean exchanges and international exchanges — has also remained negative, reflecting strong selling pressure from the Asian region.
