The cryptocurrency market is experiencing a significant downturn today, with Bitcoin’s price dropping to $111,000 from a weekly peak of $116,500, causing the total valuation of all tokens to decrease to $3.76 trillion.
Summary
- The cryptocurrency market faced a crash following the Federal Reserve’s rate cut.
- Most cryptocurrencies saw significant declines as liquidations surged by 75%, totaling $557 million.
- The downturn coincided with a $164 million drop in open interest.
The majority of cryptocurrencies are seeing losses, with tokens such as Aster, Story, Cronos, and Conflux being among the worst performers, each dropping over 5%.
Crypto declines after Fed announcement
The cryptocurrency market plummeted as traders reacted negatively to the Federal Reserve’s interest rate reduction. In an announcement led by Jerome Powell, interest rates were cut by 0.25% as anticipated by many analysts.
This reduction brought the official cash rate to a range of 3.75% to 4%, marking the lowest level since 2022 when rates were increasing due to rising inflation.
Historically, cryptocurrency prices tend to rise when the Federal Reserve reduces interest rates, fostering a risk-on attitude among market participants.
Consequently, today’s decline in the crypto market is attributed to investors “selling the news” after the anticipated rate cut, a phenomenon known as buying the rumor and selling the news.
Additionally, investors are reacting to the summit meeting between Donald Trump and Xi Jinping at the APEC Summit, where the two leaders are expected to finalize a trade agreement aimed at easing current tensions. Notably, China has started purchasing US soybeans, marking a significant diplomatic win for Trump.
Increased crypto liquidations
Another critical factor contributing to the decline of the cryptocurrency market today is the rise in liquidations observed on Wednesday.
Data from CoinGlass indicates that the 24-hour liquidations surged by 75% to $554 million. In the last 24 hours, over 146,000 crypto investors faced liquidation, with Ethereum (ETH) and Bitcoin (BTC) making up a substantial portion.
This wave of liquidations is reminiscent of the $20 billion loss experienced earlier this month, which affected more than 1.6 million traders.
Rising liquidations are in line with ongoing deleveraging among investors, with futures open interest now at $164 billion, down from $228 billion earlier this month.
Additional data suggests that sentiment among traders on leading exchanges has turned increasingly bearish, with long positions at 49% and short positions at 51%.
