Recently, Bitcoin and Ethereum have experienced significant price swings due to various factors, including massive liquidations and trade war concerns.
Sharp Price Swings in the Crypto Market
In recent days, Bitcoin's value fell by $6,000 within hours, dropping below $83,000 during a significant sell-off. Ethereum's price also fell nearly 15% due to massive liquidations and worries over trade wars. The victory of Donald Trump initially spurred a bullish trend in the crypto market, but the scenario has since changed, with digital assets experiencing significant volatility.
Factors Behind Flash Crashes
The increase in flash crashes indicates the growing unpredictability of the crypto sector. These crashes often occur without any significant bearish news, leaving investors seeking explanations. Bitcoin's sharp drop on February 26th stirred extreme fear, pushing market sentiment to a five-month low. Ethereum, on the other hand, faced even greater losses, experiencing a 15% crash in the past week.
Role of Institutional and Retail Investors
The Kobeissi Letter identified a growing gap between institutional and retail investors as a key factor behind recent flash crashes. Institutional players, especially Wall Street hedge funds, have increased their short positions on Ethereum by 500% since November 2024. Meanwhile, retail investors are causing extreme volatility in smaller altcoins like Solana. This market "polarization" has created liquidity "air pockets," intensifying price instability.
Despite recent volatility, market sentiment towards crypto seems to be shifting towards cautious optimism. Leading experts remain divided on Bitcoin's future, leaving investors uncertain about whether the worst is truly over.
