The cryptocurrency market took a hit today, with the total market capitalization dropping by over 3.1% to about $3.5 trillion on Dec. 6.
This sudden plunge has left many investors scratching their heads, trying to understand the core catalysts behind this downturn and whether more losses are on the horizon.
24-hour performance of large-cap cryptocurrencies. Source: Coin360
Let’s look closer at the factors driving the crypto market down today.
Investors go risk-off following Bitcoin’s flash crash
Today’s crypto market decline is part of a correction that started during the late New York trading hours on Dec. 5 when Bitcoin (BTC) suddenly fell 5% within minutes to below $93,000.
Bitcoin tumbled from an all-time high of $104,000 reached on Dec. 5 on Coinbase, dropping as much as 11.5% to a seven-day low of $92,055. It has since rebounded to $98,613 at the time of publication, according to data from Cointelegraph Markets Pro and TradingView.
Related: Bitcoin sudden drop to $93K wipes out $303M of longs within minutes
The sudden decline in BTC triggered panic selling among crypto investors, with cryptocurrencies dropping across the board.
XRP (XRP) extended its three-day losses, dipping as low as $2.1 on Dec. 5 before recovering to the current price of around $2.29.
Other top-cap cryptocurrencies posting significant losses on Dec. 6 are BNB Chain’s BNB (BNB), Dogecoin (DOGE) and Cardano (ADA), which are down 1.98%, 3.2% and 4.6%, respectively.
Independent analyst Jelle said that the correction was nothing out of the ordinary, as is usually the case with volatility around milestone price levels.
“The same happened around 10k and 20k – and the price pushed higher soon after. Hold on tight and enjoy the ride. ”
Long liquidations hurt crypto market bulls
The crypto market decline has accelerated further due to a mass long liquidation event over the last 24 hours.
Data from Coinglass shows that long traders—those betting on the crypto market upside—have witnessed approximately $732 million worth of liquidations in the last 24 hours. In comparison, short traders suffered over $160 million in liquidations in the same period.
Crypto market liquidation heatmap. Source: CoinGlass
Over 168,000 individual traders were liquidated, and the largest single liquidation order was on the crypto exchange OKX — a BTC/USD swap worth $18.9 million.
When long positions are liquidated, traders who are betting on prices going up are forced to sell their positions, often at a loss. This increased selling pressure has driven the crypto market valuation lower today.
Besides Bitcoin and Ether (ETH), futures tracking DOGE and XRP logged a cumulative $60 million in losses — as prices reversed from a month’s rally in both tokens that sent open interest (OI) on their futures to record highs in November.
The decline caused the crypto Fear & Greed Index to fall from “extreme greed” at 86 on Dec. 5 to“ greed” at 72 on Dec. 6, its lowest level since Nov. 5.
Crypto Fear & Greed Index. Source: Alternative.me
The sharp drop from 86 to 72 in less than 24 hours indicates mounting fear among investors, explaining the ongoing drop in crypto prices.
A technical correction?
Today’s decline in the crypto market comes following a rally that started after TOTAL—the market capitalization of all cryptocurrencies—broke above what appears to be a bull flag pattern on the weekly chart.
The market successfully surpassed the upper trendline of the bull flag at $2.25 trillion during the week ending Oct. 14. This breakout has resulted in a 55% uptick in the global crypto market capitalization to the current level of $3.48 trillion.
TOTAL market capitalization daily chart: Cointelegraph/TradingView
Therefore, more gains could follow toward the bullish target of the flag at $6.06 trillion, up around 74% from current levels.
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.
