Crypto Market Decline: Understanding the Reasons Behind the Slide in Bitcoin and Altcoins

crypto crash

Today, December 23, the cryptocurrency market is experiencing a significant decline, with Bitcoin and numerous altcoins seeing losses. Market capitalization has decreased by 2.45%, falling to $2.95 trillion. Several factors, including investor hesitancy and bearish patterns on charts, are contributing to this downturn.

Key Takeaways

Bitcoin and most altcoins are declining, with the overall market cap dropping by 2.45%.
Bitcoin fell 2.1% to $87,300, with other coins like Solana and Cardano experiencing losses over 3%.
Investor caution before the holiday season is evident, as seen in declining futures open interest.
Strong U.S. economic data suggests the Federal Reserve may not cut interest rates soon, affecting crypto performance.
Bitcoin and Ethereum are showing bearish chart patterns, indicating potential for further declines.

Current Market Situation

A noticeable crypto market downturn is occurring today, December 23, with Bitcoin and the majority of altcoins trading negatively. The combined market capitalization of all cryptocurrencies has fallen by 2.45%, now at $2.95 trillion. Bitcoin saw a decrease of 2.1%, dropping to $87,300, while other cryptocurrencies like Solana, Cardano, Chainlink, and Zcash saw declines exceeding 3%. Most of these assets remain in a bear market.

Reasons for the Current Crypto Crash

Several factors are contributing to the ongoing crash in the crypto space. Investors appear cautious, holding off actions ahead of the Christmas holiday. Data from CoinGlass shows that the open interest in futures has declined by 1.5% over the last 24 hours, now sitting at $128 billion. Additionally, spot market trading volume has also dwindled to $100 billion.

Interestingly, cryptocurrencies had previously gained traction following the release of positive U.S. macroeconomic data. According to the Bureau of Economic Analysis, the economy grew by 4.3% in Q3, driven in part by significant spending in data centers, surpassing the predicted growth rate of 3.3%. Furthermore, November data indicated improvements in the country’s industrial and manufacturing output. These economic indicators suggest that the Federal Reserve may not feel the immediate need to lower interest rates in the year ahead, which typically drives up crypto prices.

Investor sentiment remains cautious as well, with many now preparing for potential future risks. This shift is illustrated by the rising value of the Swiss franc and gold prices, signifying a move to safer assets. Moreover, major financial players, such as Apollo Global Management, have begun increasing their cash reserves amidst rising market uncertainties.

Analysis of Bitcoin Price Patterns

Bitcoin price
BTC price chart | Source: crypto.news

Another critical factor behind the ongoing crypto downturn is the emergence of bearish patterns in the price charts for Bitcoin and Ethereum.

The chart indicates that Bitcoin is forming a bearish pennant pattern, which is commonly seen as a continuation pattern. This formation consists of a vertical trendline paired with a symmetrical triangle.

Additionally, a death cross has been identified in Bitcoin's price; this occurs when the 50-day moving average crosses below the 200-day moving average, indicating potential weakness. Bitcoin has also fallen below the Supertrend indicator, suggesting further downside risk in the near term. Should a bearish breakout occur, this could lead to increased weakness across the wider cryptocurrency market.