The cryptocurrency market declined by 2.92% over 24 hours, from $3.88 trillion to $3.76 trillion, continuing a weekly decline of 2.48%. The main reasons for this decline include the liquidation of leveraged positions, regulatory concerns, and risk aversion ahead of the Federal Reserve Chair's speech.
1. Liquidation of leveraged positions
Bitcoin liquidations saw a significant increase of $111.7 million (+2177% within 24 hours), leading to a consecutive wave of selling.
2. Regulatory risks
Gemini's losses of $282.5 million before the IPO, alongside warnings of fraud in Hong Kong, raised traders' concerns.
3. Macro-economic caution
Market expectations for Federal Reserve Chair Powell's speech at Jackson Hole on Friday amid an 84.6% probability of interest rate cuts in September.
Detailed analysis
1. Impact of derivatives (negative impact)
Bitcoin liquidations saw a significant rise to $111.7 million, with 91% of them in long positions, following a break of support at $115,000. Open interest rose by 14.57% to $904 billion, indicating excessively leveraged positions. Additionally, perpetual contract funding rates decreased by 49.89% month-over-month, reflecting a drop in leveraged long positions.
What this means: High leverage (up to 50 times on platforms like Hyperliquid) has increased the magnitude of losses, significantly impacting Ethereum and altcoins such as SUI (-6.26%) and NEAR (-6.27%).
What to watch: Today's meeting between the United States and Ukraine and Purchasing Managers' Index data on Thursday, where risk-averse movements may lead to continued liquidations.
2. Regulatory challenges (varied impact)
The Gemini platform saw a 580% increase in its losses prior to the IPO, raising concerns about platforms' sustainability. The Hong Kong Securities and Futures Commission also warned about stablecoin-related scams, negatively impacting decentralized finance (DeFi) activity.
What this means: Despite Japan's approval of a yen-backed stablecoin that helped bolster stability, trust in centralized platforms has declined.
3. Shift in macroeconomic risks (negative impact)
The correlation between the cryptocurrency market and Nasdaq rose to 0.78 over 30 days, with the QQQ index down 1.2% before the market opened. Traders reduced their risk exposure ahead of Powell's speech, moving towards liquidity and bonds.
What this means: Bitcoin's volatility over 7 days has dropped to 12%, reflecting institutional caution. Additionally, Ethereum ETF flows slowed to $523 million on Tuesday compared to $1 billion on Monday.
Summary
Today's market decline is attributed to the liquidation of leveraged positions, regulatory concerns, and macroeconomic hedging. With Bitcoin dominance at 59.11%, altcoins face higher volatility risks. The market level at $3.74 trillion (Fibonacci level 78.6%) should be monitored, as breaking it may test the lower level at $3.63 trillion.
The main catalyst over the next 24 hours: Federal Reserve meeting minutes (Wednesday) and Powell's tone regarding interest rate cuts. A hawkish stance may lead to further declines and test the $3.5 trillion level, while a dovish stance may reflect losses.
