Crypto Market Liquidation: Over $400 Million Lost as Bitcoin (BTC) and Ethereum (ETH) Prices Plummet Ahead of Trump Inauguration

The cryptocurrency market faced a significant downturn during the early hours of trading in the United States on Monday, leading to a decline in the global crypto market capitalization by nearly 2.5%, dropping from approximately $3.34 trillion to about $3.25 trillion. This turmoil resulted in a staggering loss of around $135 billion in total investor wealth, as major cryptocurrencies like bitcoin (btc) and ethereum (eth) approached critical support levels. Concurrently, numerous Altcoins, including XRP, BNB, solana (SOL), Cardano (ADA), and SUI, experienced declines ranging from 3% to 8%, triggering widespread panic among investors.

The sharp decline was particularly pronounced for meme coins like Dogecoin (DOGE) and Shiba Inu (SHIB), which saw their values plummet by over 5%. As speculation swirled regarding potential market consolidation ahead of Donald Trump’s upcoming inauguration, traders were left grappling with uncertainty and volatility.

Significant Liquidation in the Crypto Space

Data from Coinglass reported that more than $420 million in cryptocurrency positions were liquidated within a 24-hour period, impacting over 175,000 traders. The largest single liquidation event occurred on the Binance exchange, where a $8.5 million BTCUSDT position was closed. In this tumultuous period, long positions accounted for nearly $340 million of the liquidated total, while short positions amounted to about $80 million. The wave of liquidations contributed to a rapid drop in market prices, further exacerbating the prevailing bearish sentiment.

The situation intensified within the last hour, as an additional $60 million in cryptocurrency positions were liquidated, adding to the downward pressure on the market.

Macro-Economic Factors at Play

Traders’ apprehension has been fueled by recent economic data indicating a stronger-than-anticipated job market in the United States. Concerns surrounding inflationary pressures under President-elect Donald Trump have led to a cautious sentiment among investors, as expectations of imminent rate cuts from the Federal Reserve have waned. Major financial institutions, including Goldman Sachs, Bank of America, and Barclays, have reported a likelihood of delaying rate cuts this year, impacting market dynamics substantially.

Moreover, the US dollar index (DXY) has surged past 111 for the first time since 2022, while the 10-year Treasury yield has risen to 4.9%, the highest level observed since October 2023. This macroeconomic backdrop has contributed to the downward trajectory of Bitcoin’s price.

Looking ahead, significant headwinds remain as key economic indicators, including US Consumer Price Index (CPI) inflation, Producer Price Index (PPI), and unemployment claims, are set to be released this week. These reports may further influence the volatile landscape of the cryptocurrency market.

Institutional Selling and Market Sentiment

Bitcoin’s price has dipped below crucial support at $91,500, while Ethereum risks breaching the $2,950 mark. The market’s downturn has been exacerbated by a notable wave of selling from institutional investors and high-net-worth individuals. Recent outflows from spot Bitcoin ETFs signal a growing trend of liquidations among major stakeholders.

Reports indicate that Bitcoin network activity has plummeted to its lowest levels since November 2024. Furthermore, the seven-day moving average of the Short-Term Holder’s Spent Output Profit Ratio (SOPR) has dipped below 1, indicating that short-term holders are selling their assets at a loss. Analysts warn that if Bitcoin fails to maintain this critical support level, it could see a further decline towards $79,000.

Adding to the selling pressure, notable figures in the crypto space, such as Tron founder Justin Sun, have contributed to the market’s downward spiral. Sun recently deposited a substantial $325 million worth of Ethereum to the HTX exchange, highlighting the ongoing trend of whale selling.

Outlook for Major Cryptocurrencies

As the market grapples with uncertainty, XRP’s price prediction appears particularly precarious. Although XRP had previously broken out above a symmetrical triangle pattern, the outlook remains uncertain given the current market conditions.

In summary, the recent drop in the cryptocurrency market can be attributed to a combination of macroeconomic factors, significant liquidation events, and a wave of selling from institutional investors. As traders brace for further economic data releases, the crypto landscape remains highly volatile and unpredictable, leaving many investors to reconsider their positions in this tumultuous market environment. The coming days will be critical in determining whether the market can stabilize or if further declines are on the horizon.