The crypto market is currently in a retracement mode, experiencing drops in market cap and increased trading volumes. Analysis indicates that investors are not in panic mode.
Reasons for the Market Decline
The recent drop of 3.32% to $3.76 trillion is connected to several key factors:
1. **Profit-Booking by Whales and Miners**. According to CryptoQuant, Bitcoin miners offloaded about 15,000 BTC, valued at $1.8 billion, following the July rally. Whales have begun their third profit-taking cycle since mid-2024.
2. **Leverage Liquidation Cascade**. The selloff was exacerbated by a 112% spike in BTC liquidations, totaling $151 million, with $143 million coming from long positions. Notably, open interest rose 9.5%, despite a 49% plunge in funding rates, revealing the stretched leverage.
3. **Technical Breakdown**. The market cap broke below its 7-day SMA at $3.85 trillion and is currently testing the 23.6% Fibonacci retracement at $3.82 trillion.
Signs of a Bottom?
The Exchange Flow Balance chart shared from Santiment provides several clues:
- BTC exhibits a streak of net outflows, suggesting that whales and long-term holders are withdrawing assets from exchanges. - ETH’s net flow appears neutral-to-slightly-positive, indicating mixed investor sentiment.
This mismatch between price declines and exchange behavior implies that while prices are falling, investors are not panic-selling.
What to Watch Next?
Tonight’s U.S. jobs report could swing short-term sentiment considerably. Weak employment numbers may heighten rate cut expectations, boosting both crypto and equities. With SPY-crypto correlation at +0.90, traditional markets will likely determine the immediate bounce or bleed.
In summary, the current downturn in the crypto market may be viewed as a short-term correction, with signs of optimism remaining among investors despite occasional losses.
