Why is the crypto market down today?

The cryptocurrency market is flashing red today, with the total market capitalization dropping by 3% to about $3.1 trillion on Feb. 24.

Several concrete factors have contributed to the latest drop in crypto prices, including:

• The crypto market still reeling from the $1.4 billion Bybit exchange hack.

• Investors are in risk-off mode amid continued outflows from crypto investment products.

• Stiff resistance on the upside stifles recovery efforts in global crypto market capitalization.

Ethereum leads the market slump

Today’s crypto market decline is part of a correction that started on Feb. 21, when the Bybit cryptocurrency exchange was hacked for over $1.4 billion ETH and ETH-related tokens in the largest-ever crypto heist. 

The sell-off continues on Feb. 24, including:

• Ether (ETH) leads the market downturn, down 5% over the last 24 hours to trade just below $2,700.

• Bitcoin (BTC) and Solana (SOL) have also recorded losses, down 0.8% and 9%, respectively.

• Other top-caps such as XRP (XRP), Dogecoin (DOGE) and Cardano (ADA) are also down 4.5%, 6.3% and 6%, respectively.

Compounding the issue are the significant liquidations in the derivatives market. 

• The sell-off has triggered leveraged position closures, with over $268 million in crypto liquidations recorded over the last 24 hours. 

•  Long ETH leveraged positions totaling $40.13 million were also liquidated on the day. 

• This exceeds the $21.4 million in long BTC leveraged position liquidations.

• Over 126,620 traders were liquidated in the past day, with the largest single liquidations taking place on OKX involving an ETH/USDT swap worth $1.41 million.

• A predominance of long liquidations suggests that the crypto market was overleveraged on the bullish side.

Despite the current bearish sentiment in the market, cryptocurrency options trading platform QCP Capital says crypto prices and implied volatility have displayed moderate reactions compared to the FTX collapse in 2022. 

This “underscores the growing maturity of the crypto landscape,” QCP Capital said in a Telegram message, adding: 

“Bybit’s ability to swiftly secure a bridge loan to cover the liquidity gap during a critical period highlights the resilience of the lending space and the ample liquidity available. This sector has steadily recovered since 2022 and experienced a significant spike ahead of last year’s US Presidential election.”

Investors continue de-risking from crypto

The crypto market’s ongoing correction aligns with the capital outflows from crypto investment products. 

Key takeaways:

• Digital asset investment products see outflows for the second week in a row

• Withdrawals totaled $508 million during the week ending Feb. 21, per CoinShares’ report.

• This indicates institutional investors decreased their exposure to digital assets.

• Bitcoin bore the brunt of the outflows, totaling $571 million.

• The year-to-date inflows dropped from $7.4 billion two weeks ago to $6.6 billion last week.

CoinShares head of research James Butterfill attributed this to uncertainty around trade tariffs, monetary policy and inflation. He said:

“We believe investors are exercising caution following the US Presidential inauguration and the consequent uncertainty around trade tariffs, inflation and monetary policy.”

Meanwhile, market participants are waiting for the last piece of US inflation data this week.

Related: $90K bull market support retest? 5 things to know in Bitcoin this week

What to know:

• The Personal Consumption Expenditures (PCE) Index, which is the Federal Reserve’s “preferred” inflation gauge, is due out on Feb. 28.

• Last week, initial jobless claims exceeded the median forecast by 4,000 to reach 219,000, demonstrating weakening labor-market conditions.

• This significantly dampened the expectation for multiple rate cuts in 2025. 

• Lowering of interest rates, for example, is unlikely before July, despite two Fed meetings scheduled in the interim, according to CME Group’s FedWatch Tool.

Crypto market faces big overhead resistance

Today’s drawdown in the market capitalization of all cryptocurrencies, or TOTAL, is part of a correction that started on Jan. 31, which saw a key support zone flip into resistance.

Key points:

• TOTAL trades below a key supply zone between $3.28 trillion and $3.31 trillion, or the 50-day and 100-day simple moving averages (SMAs), respectively.

• The relative strength index (RSI)  is currently positioned at 40, suggesting that the market conditions still favor the downside. 

• Further, selling could see the crypto market drop toward the $3.03 trillion support.

• Note that this has been a key support area for TOTAL since Nov. 20.

• Breaching this level would trigger a sell-off toward the 200-day SMA at $2.72 trillion.

According to popular analyst Crypto Zone, ”the crypto market is navigating a period of neutrality,” with the Fear and Greed Index sitting at 40.

The analyst added:

“This suggests investors are weighing their moves carefully, making it a critical time for strategic decision-making.”

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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