- The recent decline of the S&P 500 index and the reversal of the Nasdaq have sent shockwaves through the crypto market, forcing Bitcoin (BTC) to fall to $81k.
- Researchers have disclosed that this market liquidation was triggered by the Bureau of Labor Statistics’ release of the November job report.
A massive liquidation of the US stock market has forced risk assets to flip to bearish, with the crypto market entering the “Extreme Fear” territory, reading 11 on the Fear and Greed Index.
Thursday’s market pullback was reportedly triggered by macroeconomic factors, leading to a 4% decline in the S&P 500 index.
The Kobeissi Letter disclosed that the S&P 500 lost $2 trillion of its market cap in just 5 hours. In just a minute, it went from 130 points to negative 50 points. This is reported to be its fastest reversal since the “Liberation Day”.
NVIDIA also had its rally reversed from 6% to 3%. It is important to note that the Nasdaq 100 was also on course to record its largest daily gains before its unexpected reversal.
This massive meltdown had a drop-down effect on the crypto market, which has so far fallen to a market cap of $2.8 trillion after a $829 million liquidation.
Bitcoin (BTC) specifically declined below its $90k support level to $81k, losing 10% of its value in the last 24 hours. Interestingly, BTC’s correlation with the S&P 500 had broken down some days ago until this market crash, as featured in our earlier news coverage.
Ethereum (ETH) has also fallen by 10% in the last 24 hours to trade at $2,600.
More About Bitcoin’s Fall and the Other Causes
As indicated in our earlier discussion, about 35,000 BTC has been sent to Binance since October 26, signalling strong selling pressure. On November 16, analyst Ali Martinez also pointed out that about 10,000 Bitcoins, which were almost $1 billion at that time, were sent to crypto exchanges in just 72 hours, as also mentioned in our previous publication.
Explaining why the recent crash happened, the Kobeissi Letter indicated that this massive fall could be seen as a mechanical move. It signals a broader indication of shifting market dynamics. Also, the November job report released by the Bureau of Labor Statistics had a significant impact on the market, as noted in our earlier post.
What do we mean by this? When the market begins to decline, investors are afraid to be the last one out. This also works in the opposite direction, as we have seen since the April bottom. Rallies gain momentum quickly as investors are afraid of missing the next big thing.
Jay Jo, a senior research analyst at Tiger Research, has also noted that Fed Governor Lisa Cook’s comments raised the risks of macroeconomics.
The possibility of a December rate cut has faded as Fed officials remain divided and cautious. Strong jobs data and Lisa Cook’s comments raised macroeconomic risk, pushing markets into a short-term correction.
Senior Researcher at Hashkey Group, Tim Sun, has also argued that the recent market pullback has little to do with the specific news catalysts. According to him, the fall was caused by investors purchasing put hedges before the Nvidia earnings and the Nonfarm payrolls event.