Cryptocurrency Market Bleeds $76 Billion in Capital as US Dollar Reaches Two-Year High — TradingView News

The cryptocurrency market has been facing downward pressure since the beginning of the year. According to CoinMarketCap, the total cryptocurrency market capitalization fell by 10% in one week to $3.18 trillion.

The downtrend caused a negative impact on inflows and outflows in the cryptocurrency market. According to analyst Ali Charts on

This decrease indicates a decline in investment activity. Furthermore, traders withdrawing their money from the market can indicate market uncertainty and a lack of conviction in short-term price performance.

One factor that could be behind the decline amid bullish catalysts such as Donald Trump’s upcoming inauguration is a decline in demand for higher-risk assets such as cryptocurrencies and stocks.

The strength of the dollar reduces the demand for cryptocurrencies

Trump’s election victory not only boded well for cryptocurrency prices, but also for the US dollar. According to MarketWatch, the US Dollar Index (DXY) rose to 110, hitting its highest level since November 2022.

The US dollar is inversely correlated with Bitcoin, such that when the DXY index rises, cryptocurrency prices fall. Furthermore, a strong dollar tends to reduce demand for assets such as cryptocurrencies as investors avoid risk.

Weak demand is also evident in the cryptocurrency exchange-traded fund (ETF) market. This comes after Bitcoin ETFs recorded $732 million in outflows on the last two consecutive trading days, according to SoSoValue data. Ethereum spot ETFs also saw $185 million in outflows last week.

If institutions and retail traders continue to show decreased interest in Bitcoin and altcoins rather than the US dollar, this could lead to downward pressure.

The Fear and Greed indicator shows that the market is still in bull territory

Despite a decline in cryptocurrency prices across the broader market, the Fear and Greed Index, a gauge that measures trader sentiment, still shows bullish sentiment.

As of publication time, this index stood at 61, indicating a state of “greed” and that demand from investors remained remarkably high. However, the level of demand from new buyers decreased significantly, given that the index reached 78 a week ago.

Bitcoin was trading at $91,690 at press time after a 10% drop in seven days, while the largest altcoin, Ethereum (ETH), was trading at $3,108 after recording a 14% drop in one week.