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Why is the crypto market down today?

Cointime Official

From cointelegraph by Nancy Lubale

The cryptocurrency market took a hit today, with the total market capitalization dropping by over 2.5% to about $3.15 trillion on Feb. 7.

  24-hour performance of large-cap cryptocurrencies. Source: Coin360

While the crypto market is known for its volatility, several concrete factors have contributed to this latest dip, including:

  • Liquidations across the crypto market pulling down crypto prices.
  • Investors are in risk-off mode ahead of US jobs data for January.
  • Weakening market technicals hint at further downside.

Ethereum leads market slump

Today’s crypto market decline is part of a correction that started on Jan. 31 when US President Donald Trump issued an executive order imposing tariffs on imports from Mexico, Canada and China.

The downtrend week continues, including:

  • EtherETH$2,788leads the market in losses, down 5% over the last 24 hours to trade just below $2,700.
  • BitcoinBTC$99,711posted moderate losses, down 1.3% to areas around $96,800.
  • Other top-cap cryptocurrencies such as SolanaSOL$201.63, DogecoinDOGE$0.2602, and CardanoADA$0.7471are also down 6.3%, 6.5% and 6%, respectively.

Liquidations in the crypto market have also contributed to the drop, notably: 

  • The sell-off has triggered a cascade of leveraged position closures, with over $250 million in crypto liquidations recorded over the last 24 hours. 
  •  Long ETH leveraged positions totaling $32.75 million were also liquidated on the day. 
  • This is slightly higher than the $32.2 million in BTC long liquidations.
  Total crypto liquidations. Source: CoinGlass
  • Over 124,900 traders were liquidated in the past day, with the largest single liquidations taking place on Binance involving an ETH/USDT trade worth $2.59 million.

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

Investors enter risk-off mode ahead of US jobs data

Adding to the market’s volatility is the looming release of US jobs data on Friday, Feb. 7. Investors and traders are on edge, waiting for labor market indicators like job openings, unemployment rates, and wage growth, which could influence the Federal Reserve’s stance on interest rates. 

  • Market analysts forecast a slowdown in job openings to 170,000 from December’s 256,000. 
  • The unemployment rate is expected to remain flat at 4.1%.
  • Average hourly earnings are anticipated to increase by 0.3% month-on-month, similar to December’s pace.

“There’s a 28% chance that over 300,000 jobs were added in January,” said capital markets commentator The Kobeissi Letter in a Feb. 6 post on X. 

Related: Bitcoin traders eye 'huge' US jobs data as BTC price risks $95K dip

According to The Kobeissi Letter, this is “significantly” above Wall Street’s median expectation of 170,000 jobs added.

“If the US economy adds over 300,000 jobs, it would mark the first such occurrence since March 2024.”

Note that:

  • Weaker-than-expected jobs numbers could lead to a more dovish Fed policy.
  •  Traders could then price in the possibility of faster rate cuts, spurring demand for riskier assets like stocks and Bitcoin. 
  • The odds of the Fed keeping interest rates unchanged at the March 19 FOMC meetings are now at 85.5%.
  Fed target rate probabilities for March. 19 FOMC meeting. Source: CME Group
  • The earliest possible rate cut is expected in June, with the odds at 44.8%.

Will the crypto market invalidate the bull flag?

From a technical standpoint, the TOTAL index, or the combined market capitalization of all cryptocurrencies, is currently testing the support level at $3.11 trillion, the bull flag’s lower boundary.

Key points to note:

  • TOTAL briefly broke down below the lower boundary of a bull flag.
  • If this support line finally cracks, a retest of the 50-day simple moving average (SMA) at $2.55 trillion will be on the cards.
  • Losing this support would see TOTAL return to the start of the flag pole at $2.25 trillion, down about 27% from the current price levels.
  TOTAL weekly chart. Source: Cointelegraph/TradingView
  • The sharp drop in the daily relative strength index from its overbought area of 78 in December to the current value of 48 suggests the bears have a slight advantage.
  • According to popular analyst Crypto Zone, ”the crypto market is currently in a state of caution,” with the Fear and Greed Index “firmly in the fear zone” at 35.
  • The analyst added:

“This period of fear, however, has historically been a strategic buying opportunity for savvy investors, as seen in past market recoveries.”

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