Bloodbath for the Crypto Market: BTC -7.4%, ETH -10.8%

The crypto market just doesn't want to recover: after a month of deep corrections, here comes another heavy decline.

The crypto market has taken a beating in recent days, with Bitcoin and Ethereum both dropping sharply. What’s causing this downturn, and is it a sign of a bear market to come?

Bitcoin lost a key support level at $90,000 on Monday, and continued to fall throughout the day. By evening, BTC was trading below $88,000, a drop of over 7%. Ethereum also fell sharply, dropping double digits and falling below the psychological threshold of $2,500.

The broader crypto market also fell sharply, with total capitalization losing about $146 billion in a matter of hours. Most altcoins dropped by double digits, with some like Solana, XRP, and Dogecoin seeing their recent gains being almost completely wiped out.

This downturn comes after a month of relative calm in the crypto market. Following a period of sharp corrections in December, the market had largely consolidated throughout January. However, the bear market began to show signs of returning last week, with Bitcoin and Ethereum both falling sharply on Friday.

There are a few possible explanations for this downturn. One possibility is that the market is simply overheated and due for a correction. Bitcoin and Ethereum both rose sharply in 2023, and at one point BTC was trading at all-time highs above $95,000.

Another possibility is that the market is reacting negatively to some recent events in the crypto industry. On Monday, Bybit announced that it had been hacked for $1.44 billion, although the exchange later clarified that the stolen funds belonged to the giant market maker Wintermute.

However, some inaccuracies in the X coverage of the event, which claimed that the hackers had sold all the stolen ether on the market, appeared to contribute to the FUD. In reality, the stolen ether had not yet been moved or sold.

Another factor that may have contributed to the downturn is Wintermute’s continuous sales of large positions of BTC, ETH, and SOL on the market. This created strong downward selling pressure, which in turn led to cascades of liquidations of long positions, accelerating the bearish dynamic.

According to Coinglass, there were $1.47 billion in liquidations in the last 24 hours, with longs accounting for $1.36 billion. Bitcoin futures saw over 600 million in liquidations while Ethereum futures saw around 300 million.