The cryptocurrency market faced a significant downturn on 25 July, with total market capitalization falling by more than 3.5% to approximately $2.31 trillion. This decline has led to widespread concern among investors about the factors contributing to the market slump and its potential duration.
Risk-Off Sentiment Echoes in US Equities
The crypto market’s decline mirrors recent weakness in US equities. The US stock market experienced a dramatic loss of $1.1 trillion in value over the past 24 hours. The S&P 500 and Nasdaq hit multi-week lows, with the S&P 500 dropping 2% and breaking one of its longest growth streaks. This drop underscores the volatility in tech stocks, which have heavily influenced market fluctuations.
24-hour performance of large-cap cryptocurrencies. Source: Coin360
The risk-off sentiment has also impacted the US Dollar Index, which fell by another 0.3% on 25 July. Additionally, US Initial Jobless Claims rose to 235,000 for the week ending 20 July, slightly below estimates but higher than previous gains. Continuing claims decreased by 9,000 to 1.851 million. Market participants are cautious about the Federal Reserve’s upcoming meeting on 31 July, with low expectations for immediate rate cuts but increased speculation about possible cuts later in the year.
Ethereum ETFs and Market Liquidations Drive Down Prices
Newly launched US-based spot Ethereum exchange-traded funds (ETFs) faced significant outflows, totaling $133.3 million on their second day of trading. The Grayscale Ethereum Trust (ETHE) also experienced substantial outflows, amounting to $326.9 million. Despite some Ethereum ETFs posting net inflows on 24 July, including Fidelity’s Ethereum Fund and Bitwise Ethereum ETF, the overall impact has been negative.
Source: The Kobeissi Letter
Furthermore, the crypto market saw around $330 million in liquidations, with long positions being heavily hit. According to Coinglass, long traders faced liquidations worth $301.17 million, while short traders saw $35.10 million in liquidations. Ether liquidations amounted to $125.36 million, and Bitcoin liquidations reached $86.51 million. This surge in liquidations has added to the downward pressure on the market.
As traders are forced to sell positions amid rising liquidations, the overall crypto market continues to experience substantial declines.
