The cryptocurrency market is currently facing a downturn, and it’s not without reason. If you’re holding crypto or planning to invest, understanding the forces driving this decline is essential. From macroeconomic shifts to micro-market pressures, here are the key factors contributing to the recent price drops across digital assets like Bitcoin and Ethereum.
1. Leverage Shakeout (Bearish Pressure)
Overview:
The crypto derivatives market has seen a notable increase in open interest—up 24.6% to $927 billion—while the trading volume of perpetual contracts surged 25.8%. Despite this activity, the average funding rate has dropped 7.3%, indicating that traders are pulling back on bullish bets. Additionally, Bitcoin saw $110 million in liquidations, down 46% from the previous day, which highlights a wave of forced position closures.
What this means:
Over-leveraged long positions were caught off-guard as Bitcoin failed to hold the $115K support level. This led to a cascade of liquidations. The 14-day Relative Strength Index (RSI) is sitting at 34.2, suggesting that there’s still room for further downside before hitting oversold territory.
2. Crypto-Equity Correlation (Mixed Impact)
Overview:
Bitcoin and the broader crypto market are currently displaying a strong 84% correlation with the S&P 500 (SPY) over the past 24 hours. This mirrors the U.S. equity market’s reaction to disappointing jobs data revisions for May and June, which collectively saw a downward adjustment of 258,000 jobs.
What this means:
Investors are increasingly treating crypto as a risk-on asset, reacting to fears of economic slowdown. However, not all news is negative—Ethereum ETF inflows reached $152 million this week, offering a buffer against total risk-off sentiment and providing partial support to top assets like ETH.
3. Airdrop Sell-Offs (Bearish Pressure)
Overview:
Token unlocks and airdrops have also contributed to market weakness. On August 1st, Binance Alpha’s UPTOP token airdrop distributed tokens worth $340,000, which coincided with a sharp 15.96% decline in UPTOP’s price. Similar sell-offs followed the listings of Magic Square (-16.8%) and Trusta.AI (-8.78%).
What this means:
Many recipients immediately sold their airdropped tokens to realize quick profits, draining liquidity from the market. This profit-taking behavior added downward pressure on blue-chip assets like Bitcoin (-4%) and Ethereum (-6.37%) on the weekly chart, amplifying the overall bearish sentiment.
📉 Conclusion: What to Watch Next
This correction is the result of a perfect storm:
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Over-leveraged traders getting liquidated,
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Heightened macroeconomic uncertainty,
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And short-term selling pressure from token unlock events.
All eyes are now on Bitcoin’s 50% Fibonacci retracement level at $113K, as well as the upcoming U.S. Non-Farm Payrolls report (2:30 PM UTC today). These will serve as critical indicators for where the market heads next.
One key question remains:
If Bitcoin stabilizes, can altcoins begin to decouple and perform independently?
Stay informed—and always manage your risk.
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- Binance – The world’s largest cryptocurrency exchange by volume.
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- KuCoin – Known for its vast selection of altcoins and user-friendly mobile app.
These platforms offer innovative features and a secure environment for trading and learning about cryptocurrencies. Join today and start exploring the opportunities in this exciting space!
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Disclaimer: Always do your own research (DYOR) and ensure you understand the risks before making any financial decisions.
