Sharp decline and billions of dollars in losses.. What is happening in the crypto market?

The Bitcoin market and the overall cryptocurrency market have experienced a sharp downturn amid a wave of negative sentiment that dominated the markets following the release of the latest earnings reports from technology companies.

The value of the world's largest cryptocurrency dropped by more than 5% briefly within the past 24 hours, falling below $73,500, before quickly rebounding and surpassing the $75,000 level.

Over the past two weeks, Bitcoin has lost more than 23% of its value, eroding its market capitalization by approximately $401 billion, raising widespread questions about what is happening in the crypto market.

👈 What are the reasons for the decline in the crypto market?

The decline in the cryptocurrency market is partly attributed to macroeconomic factors, most notably weak earnings reports from tech giants, along with falling gold and silver prices, as well as the uncertainty surrounding the appointment of Kevin Warch as Chair of the Federal Reserve.

Jasper de Meyer, a trading strategist at Wintermute, said: “The collapse of Bitcoin is the result of three factors that the markets needed days to absorb: disappointing earnings from the Magnificent Seven companies that weakened the AI narrative, a sharp decline in precious metals prices, and the uncertainty surrounding Kevin Warch’s nomination as Fed Chair.”

He added that the simultaneous occurrence of these factors increased the downward pressure in the market.

👈 Challenges in Crypto Regulation Legislation

The failure of the cryptocurrency regulation bill is one of the key reasons behind the wave of decline, as legislative ambiguity prompted investors to reduce their exposure to the market.

The law was supposed to establish a clear framework for regulating the crypto market, but it faltered due to disagreements among prominent sector figures and members of the Senate.

Last January, Coinbase CEO Brian Armstrong withdrew his support for the bill, considering it prevented customers from earning yields on stablecoins, before entering into disputes with other parties in the sector, which increased the uncertainty about the future of the legislation.

👈 Billions of Dollars in Losses

The decline in the crypto market has resulted in billions of dollars in losses, with BitMine, the largest Ethereum holder led by investor Tom Lee, incurring unrealized paper losses estimated at around $5.85 billion.

The company purchased Ethereum at an average price of approximately $3,650, while the current price has fallen to about $2,200.

Despite these unrealized losses, BitMine continued to increase its Ethereum investments, buying approximately $46.04 million worth of the currency through a new digital wallet, according to Arkham platform data.

👈 Widespread Liquidations in the Market

According to data from CoinGlass, a blockchain market analysis platform, trading positions worth over $660 million were liquidated in the past 24 hours, including:

📌 $526.5 million in long positions

📌 $135 million in short positions

👈 Tensions dominate the crypto market

Experts interviewed by ABC News attributed the sharp decline in cryptocurrency prices to geopolitical and economic uncertainty, which prompted investors to sell off driven by market momentum.

They explained that the initial drop forced some leveraged investors to liquidate their positions, exacerbating the downward pressure.

Brian Armor, director of negative strategy research at Morningstar, said: “There are increasing concerns about risks at the moment, and cryptocurrencies tend to decline when investors seek to reduce risks.”

He added: “This may have accelerated the pace of the decline, making the scene resemble a snowball rolling downhill.”

Meanwhile, Christian Catalini, founder of the Digital Economy Lab at MIT, told ABC News: “Everything that has happened over the past few weeks has increased tension in the market, and any factor that causes investors to avoid risk directly reflects on the price of Bitcoin.”