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In the past 24 hours, the global cryptocurrency market has experienced dramatic price fluctuations. From the evening of April 12 to the early morning of April 13, the market value of major digital currencies such as Bitcoin, Ethereum, and many other small tokens generally declined. This sudden market turmoil has attracted widespread attention from market participants. Analysts are trying to explain the reasons behind this phenomenon, including possible external economic factors, policy changes, or a sharp change in market sentiment.
Market Summary
From a macro perspective, the total market value of cryptocurrencies fell to $2537.9 billion, a 24-hour drop of 7.3%. As of the time of writing, Bitcoin is currently trading at $66,814, a 24-hour drop of 4.91%, and once fell below $66,000; Ethereum is currently trading at $3,217, a 24-hour drop of 8.16%, and once fell below $3,100, with a maximum drop of 9.34%; SOL fell below $150 and then rebounded to $151, a 24-hour drop of 12.57%. Other mainstream currencies such as MATIC, XRP, DOGE, BCH, etc. have all fallen by more than 10%.
Bitcoin price trend in the early morning of April 13. Source: Coinmarketcap
According to Coinglass data, the total liquidation volume in 24 hours was US$878 million, of which long liquidation reached US$784 million.
The reason behind
As far as the market is concerned, many people are already worried about whether it will be a precursor to a bull market interruption. Currently, there are several different views on the market plunge:
It is said that the plunge was due to a correction before the Bitcoin halving. Several key reasons why the market may plunge before the Bitcoin halving include:
First, since the block reward for Bitcoin mining will be halved, miners will receive fewer Bitcoins for the same mining work. The reduction in potential income may force them to pay higher operating costs in the next quarter and sell Bitcoin at a relatively high level at current levels, thereby increasing supply pressure in the market and pulling down prices.
Secondly, high market expectations and speculation about the halving event could drive prices up before the event, and prices could reverse sharply once those expectations are not met. In addition, if the market buys heavily too early before the event, any small trigger close to the event could lead to large-scale profit settlement, causing prices to fall sharply.
Finally, based on historical models and psychological expectations, investors often guide current market actions based on historical models. Given that past halving events have sometimes led to sharp price increases, market expectations are very high. However, if these expectations begin to appear too optimistic, investors may begin to sell positions before the halving to take advantage of the current high prices, which may cause the market to fall.
Therefore, while the halving itself is a positive sign for Bitcoin, the uncertainty and speculation leading up to the halving could lead to significant market volatility and price adjustments.
From a macro perspective, the Fed's balance sheet has been tightening, reducing the supply of dollars in the market. A decline in dollar liquidity, especially in the global financial system, often leads to a decline in the prices of risky assets, including stocks and cryptocurrencies. Since the cryptocurrency market is very sensitive to liquidity changes, capital outflows may cause a sharp drop in prices. In addition, when the market expects that the dollar will become more scarce, investors may turn to more stable or traditional assets and reduce their investment in cryptocurrencies.
According to Arthur Hayes,
The Bitcoin block reward is expected to halve on April 20. This is often seen as a bullish catalyst for the crypto market. I agree that this will push prices higher in the medium term; however, price action directly before and after the halving can be negative. The narrative that the halving is positive for cryptocurrency prices has become entrenched. When the majority of market participants reach a consensus on a certain outcome, the opposite usually occurs. This is why I believe that Bitcoin and general cryptocurrency prices will see a drop around the halving.
Considering that the halving occurs during a period when USD liquidity is typically tight, this will add fuel to the crypto asset sell-off. The timing of the halving further aggravates my decision to pause trading until May. … Therefore, I choose to sell.
Bitcoin price trend before and after halving,
Despite the current market uncertainty, many investors and analysts remain optimistic about the long-term prospects of cryptocurrencies. They believe that this price adjustment may provide a good opportunity for long-term investors to enter the market. Every adjustment in the market is a test of investor sentiment and market trends, and also a period of layout for potential future growth.
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