The crypto market continues to record sharp negative momentum, as the price of Bitcoin stabilizes around $69,376, deepening its weekly losses to about 8.5%, a low not seen since August.
The current crash, which began with the breaking of the $70,000 threshold, is now accompanied by an unprecedented liquidation wave in the derivatives market and a worsening of global macroeconomic conditions.
According to updated data from Coinglass, the volume of leveraged positions forcibly liquidated by exchanges within 24 hours climbed to $1.47 billion, of which about $1.31 billion were long positions (bets on gains that were wiped out following the drop). The automated mechanism by which exchanges sell the collateral of leveraged traders accelerated the snowball effect and created immense selling pressure in short periods of time.
US economic pressure and investor flight
Against the backdrop of the declines, the crypto market is absorbing strong headwinds from the US economy. Recently published inflation data pointed to a higher-than-expected rise, causing investors to fear that the US central bank will be forced to raise interest rates again next month.
These factors are joined by the strengthening of the dollar and rises in bond yields, which cause investors to prefer safe avenues over digital assets. Despite a brief respite that arrived following calmer producer data, the general atmosphere remains very tense.
Large and institutional entities also continue to pull their money out: Bitcoin exchange-traded funds recorded five consecutive trading days of massive withdrawals, totaling about $1.44 billion. At the same time, the market is suffering from a severe cash and liquidity crunch following a sharp drop in the amount of stablecoins (linked to the dollar), which makes exchanges particularly sensitive and causes every small fluctuation to turn into a sharp fall.
All of these connect to additional market upheavals, including the surprising resignation of Nvidia's CEO that dragged down technology stocks, and reports of a security escalation in the Middle East.
Analysts warn: The historical support test
Now, investors' eyes are turned to critical support levels that will determine where the market is heading. Analysts at investment house Bitfinex noted that Bitcoin is currently testing a historical defense level around $67,800, a line that many in the market believe serves as the boundary separating a bull market from a bear market over time. According to them, as long as the coin manages to hold on and close the week above the $68,000 area, the long-term trend may still remain positive, but a break of this line could expose it to further decline.
