Bitcoin declined over the weekend to a level not seen in six months due to the ripple effects caused by liquidity tightening across the entire crypto market. This happened even though some analysts continued to pay attention only to the most important funding figures, which still negatively affect trader sentiment. The top digital coin dropped to almost $93,000 before it went back up to around $95,285, thus marking its lowest value since the beginning of May amid increased volatility and heavier liquidation activities on various exchanges.
Within the last day, liquidations totaling around $619 million were recorded by the market, out of which $243 million were in bitcoin only. Moreover, the Fear & Greed Index accompanying this data by Coinglass sank down to 10, which implied “extreme fear” among traders when the macroeconomic and liquidity-related troubles occurred at the same time. The analysts recognized these issues as the main reasons for the abrupt drop as well as the steep market confidence reset.
According to Derek Lim, the research lead at Caladan, the fall was mainly caused by liquidity troubles arising from the shutdown of the U.S. government, which resulted in the Treasury General Account being at a high level. Lim mentioned that the shortage of liquidity could be relieved if government spending gets back to normal and the payments that were held up are made again.
In addition, he talked about the potential 17 trillion yen Japan package aimed at stimulating the economy, and that it could be one of the reasons affecting the world liquidity situation. The head of markets at MHC Digital Group, Edward Carroll, agreed with the point of view about the aggravated liquidity stresses and brought up treasury bill spreads and repo markets as examples that look like late 2018 and 2019, thus predicting that crypto markets will react faster than traditional assets.
Bitcoin’s support zone between $88,000 and $91,000 is the range that traders are most intensely monitoring. BTC Markets analyst Rachael Lucas pinpointed this as the most important zone. Lucas also mentioned that although bitcoin is on a technical downtrend, historical data imply that such setbacks have been the forerunners of strong cycle peaks.
Caladan’s Lim communicated that the 50-week simple moving average, which is around $103,000, is a very significant point of reference, and the market is full of people who are looking for the price to be able to stay either above or below that level. On the other hand, altcoins continued to fall, with Ethereum being priced at $3,144, XRP at $2.23, and Solana at $138.7, which indicates the implementation of the initial phase of the bear market for the whole crypto market caused by lower liquidity and negative sentiment.
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