The crypto market is booming on Friday, pushing the global crypto market cap up more than 7% to $2.55 trillion. Bitcoin (BTC) and Ethereum (ETH) prices both tumbled more than 7% and other altcoins including BNB, XRP and Cardano (ADA) also fell.
Despite the meme coin hype these days, Dogecoin (DOGE) and Shiba Inu (SHIB) prices have also seen major gains, tumbling by 12%. Traders and analysts predicted the much-needed capitulation for the market to recover further amid Bitcoin halving.
Reasons Why Bitcoin and Altcoins Crashed
1. Friday’s options expire
The market fell in response to more than $3 billion worth of Bitcoin and Ethereum options expiring on Friday, March 15. The crypto market always witnesses high volatility when options expire.
Notably, 30,568 BTC options of notional value $2.09 billion will expire today. The put-call ratio is 0.79 and the maximum pain point is $66,000, indicating a profit-booking scenario for option traders while remaining bullish. BTC price fell to a low of $66,770, which is still higher than the maximum pain price. However, Bitcoin will see a recovery due to a buy-the-dip opportunity.
Meanwhile, 332,094 ETH options of notional value $1.24 billion will expire, with a put call ratio of 0.69. The maximum pain point is $3,550. Traders are particularly bullish on Ethereum, but have successfully booked profits above the maximum pain point. ETH price is trading higher at $3,748 after falling to a 24-hour low of 3,656.
2. Faded Fed Rate Cut Hopes
US Fed rate cuts will largely depend on new economic data, including inflation and jobs, US Federal Reserve Chairman Jerome Powell said in his testimony to Congress.
After warmer CPI data earlier this week, higher PPI, retail sales and unemployment rates indicate higher inflation and resilience of the US economy. This gave the Fed more reason to delay rate cuts until mostly the end of the year. The Fed is likely to keep rates steady in March and May.
The CME FedWatch data shows a 54% probability of 25 bps rate cut in June and 47% chance of 25 bps rate cut in July. The US stock market fell after the recent data, with US stock futures and global stock markets falling today amid market volatility and uncertainty.
US dollar index (DXY) rises to 103.40 from 102.85, first gain in four weeks. In addition, the US 10-year Treasury yield rose for the fourth day in a row to 4.28%, the highest level since the start of the month after warm PPI data dampened optimism about potential Fed rate cuts this year. Fed swaps now point to fewer than three rate cuts this year.
3. Crypto Holdings Liquidated Amid Liquidity Flush
The crypto market wiped out more than $680 billion in market value in the recent liquidations amid liquidity flush. Coinglass data indicates that over 192K traders were liquidated in the last 24 hours with the largest single liquidation order of BTC-USDT exchange worth $13.30 million on crypto exchange OKX.
Nearly $543 million in longs and $137 million in shorts were liquidated, with Bitcoin and Ethereum witnessing more than $242 million and $115 million liquidated. This made the crypto market boom, but it also provided a buy-the-dip opportunity.
Popular analyst Michael van de Poppe predicted a short-term liquidity flow amid pre-Bitcoin halving rally. He added that lower timeframe bearish divergences appear to be valid and recommends buying altcoins dip.
4. Slow Bitcoin ETF Inflows
US Spot Bitcoin ETF is seeing a significant drop in inflows, falling 80.6% to $133 million on Thursday, CoinGape reports. Notably, this is the lowest inflow over the past eight trading days as Wall Street sentiment weakens amid the new economic data.
Investors took stakes in Grayscale’s GBTC amid the pre-halving top and indications of the decline in the gold and equity markets. GBTC recorded an outflow of $257.1 million on Thursday.
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