What is the reason behind the decline in today’s cryptocurrency market?

The cryptocurrency market experienced a downturn on March 19, resulting in a 7.68% decrease in total market capitalization, which now stands at $2.27 trillion.
Bitcoin (BTC), the leading cryptocurrency by market capitalization, led the losses by dropping approximately 7% to around $62,650. Ethereum’s native token, Ether (ETH), the second-largest cryptocurrency by market cap, also suffered a decline of around 8% to $3,200.
Other top tokens performed similarly poorly.
The decline in market capitalization coincided with the largest single-day outflow ever recorded from Bitcoin exchange-traded funds (ETFs). Grayscale Bitcoin ETF experienced outflows worth $642.5 million on March 18, while Fidelity’s Bitcoin ETF saw its lowest inflow day on record at $5.9 million. This resulted in a net outflow of $154.3 million from spot Bitcoin ETFs.
The slowdown in capital inflows towards Bitcoin ETFs comes ahead of the Federal Open Market Committee meeting on March 20. The potential for Bitcoin’s future bull run and the overall crypto market rally depend on the Federal Reserve shifting from tight to loose monetary policy, which may happen if inflation falls below 3% or signs of an economic downturn emerge. Therefore, the crypto market rally could falter if high-interest rates persist.
The decline in the crypto market is part of a broader correction that began on March 14 when it reached a local peak of around $2.72 trillion. Bearish divergence signals emerged before the correction, indicating that the price growth was losing its underlying strength. Additionally, the market’s daily Relative Strength Index (RSI) reached excessively high levels, suggesting overvaluation and resulting in reduced trader demand due to perceived excessive prices.
The sharp drop in cryptocurrency prices has led to a wave of liquidations in the derivatives market, causing long positions to be liquidated. In the past day, over $182 million in positions have been liquidated, with long positions accounting for $140 million of the total. These liquidations can put downward pressure on asset prices, particularly when there is a lack of sufficient buying momentum from trading volumes.
It is important to note that this article does not provide investment advice or recommendations. Readers should conduct their own research before making any investment or trading decisions.