📉 Why did cryptocurrencies suddenly drop yesterday?
The market witnessed a sharp decline of over 5% in one day, resulting from the interaction of these key factors:
1️⃣ Collapse of hopes for an interest rate cut
The latest Consumer Price Index indicated sustained inflation at high levels, prompting investors to abandon their interest rate cut expectations, according to CoinMarketCap. This shock negatively affected high-risk assets like crypto.
2️⃣ Sudden migration from Bitcoin ETF funds
This manifested in a capital outflow of about $202 million during a single session, especially from Fidelity funds, which increased selling pressure on BTC and Altcoins.
3️⃣ Massive liquidation of leveraged positions
Within 24 hours, over $1.15 billion in leveraged positions were liquidated, according to CoinMarketCap. The majority of those positions were long, leading to an additional wave of selling.
4️⃣ New geopolitical tension
Fears have risen after escalating tensions in the Middle East, particularly between Israel and Iran, prompting investors to flee to safe assets, contrary to crypto.
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🔍 Summary:
The lack of an interest rate cut activates a "tight liquidity" scenario.
Withdrawal of liquidity from ETF + margin liquidation doubles selling pressure.
The geopolitical spike increases public fear in the markets.
These sharp corrections are terrifying but not out of context, and are often viewed as an opportunity for traders with a clear plan.
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