Good morning Asia, the cryptocurrency markets are experiencing significant downturns today, with Bitcoin slipping to a five-month low on Wednesday. The leading cryptocurrency fell below the $100,000 mark, prompting concern among investors amid a prolonged US government shutdown and indications of slowing growth in the economy.
Bitcoin’s recent decline positions it approximately 20% lower than its highs from early October, where it reached above $126,000. During this turbulent period, Ether has also faced steep losses, plunging over 12% to settle around $3,179. As a result of the market’s volatility, the total crypto market capitalization has decreased by 4.8% to $3.45 trillion.
The crisis has led to a surge in liquidations within the crypto space. Recent data from CoinGlass indicated that approximately $2.09 billion in crypto positions were liquidated within a 24-hour window, including $1.68 billion from long positions. Although this figure is dwarfed by October’s record liquidation of $19 billion, it reflects a growing caution among traders following the earlier market fallout.
Amid these struggles, Bitcoin has seen an increase in dominance over other cryptocurrencies, climbing to 60.15%. Analyst Benjamin Cowen noted that the current market structure favors Bitcoin, suggesting that altcoins could potentially decline by another 30% against Bitcoin in the upcoming weeks. He stated that holding Bitcoin is more advantageous unless there is a strong rally in Bitcoin itself that prompts an altcoin season.
Investors’ anxiety is echoed beyond the cryptocurrency world, as US stocks ended sharply lower following warnings from major banks about potential market downturns. The S&P 500 and Nasdaq recorded their largest single-day losses since October 10, primarily influenced by weakness in technology stocks and concerns over inflated valuations tied to the artificial intelligence sector. Executives from Morgan Stanley and Goldman Sachs have indicated risks of market bubbles, while JPMorgan’s chief executive highlighted the likelihood of significant corrections in the near future.
The ongoing US government shutdown, exacerbated by a congressional impasse, has lasted nearly 36 days, halting official economic data releases. As investors rely on private data and Federal Reserve commentary for guidance, market reactions have been hesitant and reactive. Sector-wise, technology shares have particularly struggled, with a 2.3% decline leading losses across the S&P 500, while financials showed some resilience.
Asian markets mirrored the declines on Wall Street, with the MSCI Asia-Pacific index falling 0.8%, driven by a notable 4.1% drop in South Korea’s Kospi. US e-mini futures further declined by 0.4% after the S&P 500’s prior fall of 1.2%.
Amid these macroeconomic challenges, some analysts suggest that there may still be potential upward movement for Bitcoin and other cryptocurrencies. Ryan Lee, chief analyst at Bitget, indicated that Bitcoin could test ranges between $115,000 and $120,000 if macro conditions improve. He also mentioned that Ether might rebound towards $4,200, particularly if there are advancements in layer-2 scaling and DeFi developments.
Key factors to monitor include upcoming Federal Reserve rate decisions, ongoing inflows into exchange-traded funds (ETFs), and regulatory clarity from entities like the SEC, as these developments could significantly influence the mainstream adoption of cryptocurrencies. However, lingering geopolitical tensions and potential unexpected inflation may pose risks that could lead to further market volatility.
