Why is the crypto market down today? — Trading View News

The cryptocurrency market took a hit today, with the total market capitalization falling by about 6.3% to about $3.35 trillion on January 8, as strong US economic data pointed to the possibility of an interest rate hike.

Let’s take a closer look at the factors that led to today’s cryptocurrency market decline.

Bitcoin leads market decline

Today’s cryptocurrency market decline is part of a correction that began during early trading hours in New York on January 7 when Bitcoin went live Bitcoin against the dollar The $100,000 level fell, as two editions of stronger-than-expected US economic data suppressed the cryptocurrency assets’ first-year momentum.

Bitcoin price fell as much as 6.35% to reach an intraday low of $05,279 on January 8. The decline in the leading cryptocurrency has sparked panic selling among cryptocurrency investors, with prices falling across the board.

ether ETH/USD It lost all the gains it had made over the past seven days, and fell to a low of $3,300 on January 8th, recording losses of 10% over the past 24 hours.

Another high-value cryptocurrency that recorded significant losses on December 16 was Dogecoin DojiUSDCardano (ADA) and Solana SolUSDwhich decreased by 12%, 11.7%, and 10%, respectively.

The sharp drop in prices led to the liquidation of approximately $631 million of long positions across derivatives markets betting on rising prices, according to CoinGlass, marking the first significant influx of leverage this year. Leveraged long BTC positions totaling $111 million were liquidated on the day.

A similar move was seen on December 18 in the derivatives market when more than $844 million of long positions were liquidated. This liquidation was accompanied by a 12% decline in TOTAL – the combined market capitalization of all cryptocurrencies – with more than $1.2 billion being wiped out of the cryptocurrency market.

The dominance of long liquidations suggests that the cryptocurrency market was overleveraged on the upside, mainly due to profit-taking and risk-off mode following strong US economic data.

Strong US economic data leads to risk-off mode

The ongoing correction in the cryptocurrency market reflects the weakness seen in US stocks. The S&P 500 fell 1.1% to close the day at 5,509.03 on January 7, while the Nasdaq Composite fell 375 points.

The Dow Jones posted its second straight daily loss, falling 0.61% to close the January 7 trading day at 42,528.36.

“The S&P 500 is now down 75 points today and erased its gains since the beginning of the year,” capital markets commentator The Kobeissi Letter said in response to the market’s reaction to the economic data print.

“More than $625 billion in market value was wiped out of the stock market today.”

The strong data also prompted investors to lower their expectations for interest rate cuts by the Federal Reserve in 2025. This affects investor sentiment towards riskier assets such as cryptocurrencies.

Market participants now see only a 95% chance that interest rates will remain unchanged at the central bank’s Jan. 29 meeting, up from 90.4% just a week ago and 62.7% more than a month ago, according to the CME FedWatch tool.

Looking further afield, the odds of a rate cut in March and May are less than 50% at 37% and 42% respectively.

Cryptocurrency market flips the 50 simple moving average to the resistance level

The recent decline in cryptocurrency prices saw the TOTAL – the combined market capitalization of all cryptocurrencies – lose support to the 50-day simple moving average (SMA) at $3.35.

In addition, today’s cryptocurrency market decline is preceded by a bearish divergence between its price and the Relative Strength Index (RSI), as shown in the chart below.

It is worth noting that the TOTAL index rose between November 5 and December 31, forming a series of higher lows. However, in the same period, its daily RSI declined, forming lower lows.

​​The divergence between high prices and low RSI indicates weakness in the prevailing uptrend, prompting traders to sell more at local highs.

If the selling intensifies, the cryptocurrency market will likely fall towards the $3.18 trillion support level embraced by the uptrend line. Note that this line has been a support for TOTAL since the US elections on November 5.

On the other hand, a return of buying pressure could push the cryptocurrency market capitalization above the 50-day simple moving average and towards the local high of $3.54 trillion reached on January 6.

This article does not contain investment advice or recommendations. Every investment and trading move involves risks, and readers should conduct their own research when making a decision.