The cryptocurrency market faced significant turmoil on Monday, with nearly all digital assets sliding into negative territory. As of the latest reports, the total market capitalization for all cryptocurrencies dipped below $4 trillion, marking a notable decline since Sunday evening.
Bitcoin (BTC-USD) led the downward trend, experiencing a 3% drop, while ether (ETH-USD), the second-largest cryptocurrency, fell by 6%. Other cryptocurrencies also took a hit, with Solana (SOL-USD) down 7%, Dogecoin (DOGE-USD) witnessing a 10% decline, and World Liberty Financial (WLF) matching that drop.
The situation escalated overnight, as approximately $1.7 billion in trading positions within the crypto derivatives market were liquidated, according to data from Coinglass. A striking 94% of these liquidations stemmed from bullish bets, with the largest single liquidation valued at $12.7 million occurring on the OKX crypto exchange.
Specifically, traders who placed bullish bets on ether faced over $500 million in liquidations, while those speculating on bitcoin lost approximately $280 million. The sell-off can be traced back to market reactions following the Federal Reserve’s recent indication of a forthcoming 25-basis-point reduction in its short-term policy rate.
The pressure is mounting on companies that have incorporated bitcoin and other cryptocurrencies into their balance sheets, commonly referred to as crypto treasury companies. Despite early-year surges in stock prices, many of these firms are feeling the effects of a market downturn. Currently, over 180 public companies hold bitcoin on their balance sheets, fueled by aspirations to replicate the remarkable stock performance of Michael Saylor’s company, MicroStrategy (MSTR).
As for MicroStrategy, its stock was down 1.3% amid the recent volatility. The firm has become a significant player in the bitcoin market since it began acquiring the cryptocurrency in 2020, leveraging a mix of debt and equity. Despite facing recent setbacks, the stock has appreciated by an astonishing 2,200% since the company’s initial bitcoin investments.
However, among the imitators of MicroStrategy, about 94 firms share similarities in size, business model, and funding methods for their bitcoin purchases, according to Vetle Lunde of K33 Research. Alarmingly, about 25% of these companies now have market capitalizations dipping below the value of their bitcoin holdings, prompting the first merger in the bitcoin treasury space.
On Monday, Semler Scientific (SMLR), a health tech firm that transitioned into a bitcoin treasury company, saw its stock surge by 27% following news of an acquisition agreement with a larger bitcoin treasury company backed by Vivek Ramaswamy, Strive Inc. (ASST).
The challenges are not confined to bitcoin. Bitmine Immersion Technologies, which holds 2.15 million in ether and recently appointed renowned strategist Tom Lee as its executive chairman, saw its stock decline by 7% as of Monday morning.
Despite these challenges, the crypto sector has also celebrated a series of regulatory victories this year, partially attributed to the growing acceptance of digital assets by the Trump administration. Consequently, several US-listed crypto IPOs have emerged, including companies like Circle (CRCL), Figure (FIGR), Bullish (BLSH), and Gemini (GEMI). On Monday, the share prices of these firms reflected the broader market trends, with Circle falling 5%, Figure down 4%, and Bullish and Gemini experiencing declines of 7% and 4%, respectively.
