Crypto Market Bloodbath: Pre-Halving Jitters, Liquidations, and Macro Worries Drag Prices Down

The cryptocurrency market is experiencing a significant downturn today, with Bitcoin (BTC) leading the plunge. Several key factors are contributing to the bearish sentiment:

1. Pre Bitcoin Halving Retrace?

Some analysts believe Bitcoin is in the pre-halving phase, a historically observed pattern of price dips before the halving event (scheduled for April 20).

This drawdown, 18 days before the halving, aligns with previous halving cycles where BTC dropped by 20% (2020) and 38% (2016) during similar pre-halving periods.

2. Bitcoin Liquidations on the Rise

Sharp movements in the Bitcoin futures market indicate significant liquidations, particularly on long positions. Over $115 million in long positions were liquidated within 24 hours on April 2nd, with spikes exceeding $21 million within a few hours.

This lack of buying pressure to counter the selling exacerbates the price decline. Declining trading volume, down over $30 billion from the March 5th peak, further weakens the market.

3. Short-Term Holders Dominate, Profit-Taking Continues

With trading volume dropping and long-term holders de-risking, a surge in short-term holders is observed. This influx of short-term holders, with the highest supply since July 2021, could further fuel the price drop.

4. Macroeconomic Concerns Add Fuel to the Fire

A strengthening US dollar, with the dollar index surpassing 105 for the first time in four months, weakens the appeal of dollar-denominated assets like Bitcoin. A stronger dollar often indicates global financial tightening, discouraging riskier investments like cryptocurrencies.

Unexpected growth in the ISM’s manufacturing PMI suggests the US economy might not need aggressive Fed rate cuts as initially anticipated. This dampens expectations of a dovish Fed policy, historically considered favorable for crypto prices.

Looking Ahead: Uncertainties Remain

Although the long-term outlook for Bitcoin might improve with increasing institutional adoption, short-term risks are significant. The Fed’s monetary policy decisions and potential regulatory actions remain wildcards impacting crypto prices.

While some speculate ballooning fiscal debt could force the Fed’s hand towards rate cuts, boosting crypto, the immediate future appears bearish.