The cryptocurrency market experienced a severe sell-off over the weekend, with total liquidations soaring to over $2.5 billion, the highest level in months. The market capitalization of all digital assets fell by over 5.80% in 24 hours to $2.67 trillion.
Bitcoin (BTC) broke below the critical $80,000 support level, trading as low as $78,678, a sharp decline from its all-time high of $126,300. Ethereum (ETH) crashed to $2,400, while Binance Coin (BNB) fell to $770. The futures open interest plummeted by 10% to $113 billion, indicating a massive unwind of leveraged positions.
The crash is attributed to three primary factors:
1. Federal Reserve Leadership Uncertainty: The sell-off accelerated after former President Donald Trump nominated Kevin Warsh to become the next Federal Reserve Chair when Jerome Powell's term ends in May. Despite recent pro-crypto statements, analysts highlight Warsh's historical record as an inflation hawk who voted against interest rate cuts and quantitative easing in 2011. The market fears he will maintain a hawkish monetary policy stance.
2. Soaring Geopolitical Tensions: Odds of a U.S. attack on Iran, as tracked by prediction market Polymarket, jumped to over 80%. This has driven oil prices higher (with Brent crude hitting $70) and increased financial market volatility, negatively impacting risk assets like cryptocurrencies. Bitcoin's perceived role as a safe-haven asset has been debunked, with capital flowing into traditional havens like gold and the Swiss Franc.
3. Technical Breakdown and Leverage Unwind: Bitcoin's price chart shows a breakdown from key technical patterns, including a rising wedge and a bearish flag, and it has moved below the 50-week Exponential Moving Average (EMA). This technical weakness triggered a cascade of liquidations, with Ethereum positions worth over $1.1 billion and Bitcoin positions worth over $785 million being wiped out. Solana (SOL) and XRP saw liquidations of $197 million and $61 million, respectively.
Market Outlook and Analyst Perspective: Popular analyst and BitMine Chairman Tom Lee maintains a longer-term bullish view, noting that Bitcoin has historically emerged from major dives. Potential catalysts for a future recovery include a falling U.S. dollar index, anticipated Federal Reserve interest rate cuts later in the year, and bargain conditions as metrics like the MVRV (Market Value to Realized Value) indicator have slumped. The consensus view is that the crash may continue in the near term before a potential rebound later in the year.
