Why is the Crypto Market Crashing Today with Bitcoin Falling Below $56K?

Sunday’s 4% decline erased the gains from Saturday’s rally in the cryptocurrency realm, driving Bitcoin and other altcoins back into a downtrend. The expanding supply on Monday morning during Asian trading hours dampened the prospect of an upward trend for the week.

Currently, Bitcoin’s value is $55,269, reflecting a 1.30% decrease within a day, and has touched a low of $54,296. The altcoin market commences the week on a downward trajectory, with major cryptocurrencies shedding over 5% in value.

Ethereum, Solana, and Toncoin have experienced declines of 5.25%, 7.23%, and 5.45%, respectively. Meme-based cryptocurrencies are significantly impacted, with DOGE, SHIB, and PEPE falling by 8.08%, 7.64%, and 12.84%, respectively.

As the new week begins, fears of a more extensive market fall loom over the cryptocurrency markets. A thorough analysis of the top digital currencies provides a more in-depth perspective on the market’s trajectory.

Explore our Bitcoin price prediction for insights on whether Bitcoin could reach the $100,000 milestone this year.

Bitcoin’s Market Performance

Bitcoin’s downturn persists with no sign of a rebound from the Saturday recovery. Dipping below the $56,000 threshold, BTC now trades at $55,269, witnessing close to a 5% fall in 24 hours.

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The bearish sentiment deepens in the daily chart as BTC price breaches the descending trendline. Sunday’s 4% plunge forms a bearish engulfing candlestick pattern, enforcing the downward momentum.

Consequently, $111M worth of long positions were liquidated in the market on Sunday, a trend that continued with $75M on Monday morning. With these indicators, bearish traders are further emboldened by the consolidating downtrend.

Critical Decline in Bitcoin Hashrate

Bitcoin’s hashrate drawdown represents a decrease in mining activities. According to Cryptoquant, this metric has dropped to lows not seen since December 2022.

Previous downturns in the hashrate have often aligned with considerable price fluctuations. The last drop in December 2022 was followed by a bullish price correction, hinting that we might be approaching a similar turning point.

While Bitcoin’s price is on a downslide, the substantial drop in the hashrate could point to either an imminent market bottom or an approaching phase of bullish momentum. Nonetheless, this interpretation contradicts the current price trends as BTC slips below the $56,000 mark.

The next critical support is positioned at the $52,000 figure, which may serve as the foundation for an upward rally toward the long-term goal of $100,000.

Mt. Gox Payouts Lead to Market Uncertainty

The ongoing reimbursement from the defunct Mt. Gox exchange, which collapsed in 2014, has revived anxiety among traders. With creditors finally receiving their payouts after a lengthy delay, there is a heightened concern over the potential impact of an influx of Bitcoin into the market.

Based on recent disclosures from the appointed trustee, Mt. Gox creditors will be compensated in Bitcoin (BTC) or Bitcoin Cash (BCH) within two weeks to three months, depending on their selected exchange platform.

The payout scheme has been designed to mitigate the risk of drastic sell-offs, but the redistribution of approximately $2.71 billion in BTC remains a source of market tension.

Bitcoin’s Trajectory for the Week

The current market fear, uncertainty, and doubt (FUD) suggest that bearish trends may persist over the week. With Bitcoin losing ground beneath $56,000, the forthcoming support level at $52,000 is critical.

In addition, the market trend could accelerate the crossing of the 50-day and 200-day exponential moving averages (EMAs), known as the death cross, hinting at a potential downtrend. This could result in substantial sell-offs and liquidations, especially in the altcoin sector.

Read Also: Bitcoin, Ethereum, and XRP Price Prediction: Has The Bull Rally Resumed?