The cryptocurrency market took another hit on September 3, with the total market cap dropping by over 1.5% to around $2.3 trillion. The plunge left many market participants questioning the key catalyst for this downturn and how much longer it will last.
Let’s take a look at the factors that have caused the cryptocurrency market to decline today.
Cryptocurrency Prices Plummet on Weak Manufacturing Data
Cryptocurrency markets are also selling off, mirroring the weakness experienced by U.S. stock markets, with the S&P 500 seeing its biggest drop since the market crash on August 5.
The S&P 500 was down 1.8% after two hours on Wall Street on September 3, the Dow Jones actually fell 563 points, or 1.4%, and the Nasdaq Composite was down 2.9%.
Likewise, cryptocurrency prices flashed red, with Bitcoin (BTC) down 1.6% over the past 24 hours to trade at $57,713 at press time. Ether (ETH) was down 3.4% to trade at $2,441.
The correction in stocks and digital assets followed another weak ISM manufacturing survey, but stocks were already falling before the print. The market may have been headed for a correction after its strong performance in late August.
“US manufacturing officially contracted for the fifth straight month, down 47.2 points,” capital market commentator Kobeishi Letter wrote on the X social media platform on September 3.
The ISM survey on September 3 reported that the PMI index missed expectations of 47.5 points in August. New orders fell to 44.6 points from 47.4 in July, marking the third straight month of contraction.
This outlook suggests that the U.S. supply market is actually weaker than expected, increasing expectations that the Federal Reserve will cut rates at the next FOMC meeting.
The debate now is about the size of the Fed’s rate cut. According to the CME FedWatch tool, the futures market is confident of at least a quarter-percentage point move on September 18, with the odds of a larger 50-basis point cut priced at about a 37%.
A key factor influencing these rate cut expectations is the August payrolls report due out on September 6, which is expected to show August job gains recovering to 160,000 and the unemployment rate falling to 4.2%.
Cryptocurrency Markets Rocked by $100 Million Liquidations
The September 3 bear market in cryptocurrencies was a result of accelerated liquidation of long positions across the derivatives markets, overwhelming short positions over the past 24 hours.
According to data from CoinGlass, long traders (traders who are betting on a bull market in the cryptocurrency market) have seen a total of $65.08 million worth of liquidations in the last 24 hours. In contrast, short traders have seen over $35.24 million worth of liquidations in the same period.
According to Coinglass data, Ether liquidations reached $21.9 million over the last 12 hours, bringing the cumulative leveraged long position value for the day to over $27 million. Long Bitcoin liquidations reached $18.44 million over the last 12 hours, and this figure is increasing at the time of publication.
When long positions are liquidated, traders who are betting on a price increase are often forced to sell their positions at a loss. This increased selling pressure has led to today’s low valuation of the cryptocurrency market.
Meanwhile, a decline in OI indicates a decline in active futures contracts, indicating that traders are closing positions and exiting the market.
Nonetheless, most of the top coins, including Bitcoin and Ether, have positive funding rates, which shows that the market is generally more bullish as traders remaining in the market are willing to pay more to maintain long positions.
relevant: Is Bitcoin headed for a breakout or crash? Analysts offer their opinions
A weakened market structure indicates a deeper correction.
From a technical perspective, today’s cryptocurrency market decline is part of a correction within the prevailing downward parallel channel pattern. For example, the market cap has fallen 27% since it fell from $2.734 trillion in March.
The downtrend has caused the total cryptocurrency market capitalization to lose important support levels, including the $2.2 trillion level and the $2.108 trillion level, which is the middle boundary of the descending channel.
Looking ahead, the Relative Strength Index is at 45, confirming that bears are increasingly gaining the upper hand in the market. If selling activity continues, the cryptocurrency market cap could fall further to $1.875 trillion in the coming weeks.
Conversely, a breakout of the middle trend line would likely see the cryptocurrency market cap rise towards the upper trend line, which is around $2.341 trillion.
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.