Bitcoin (BTC) Price Dropped Below $79k – Here’s Why the Crypto Market Is Down

The crypto market dropped hard today, with total market value falling over 6% to around $2.66 trillion. Bitcoin led the decline, briefly slipping below $79,000, and the selling spread across the entire market. Ethereum fell 9%, BNB declined 8%, and Solana saw the steepest losses with an 11% drop.

This wasn’t an isolated crypto event. Multiple pressures hit the market at the same time, creating a fast and aggressive risk-off move.

Why Is the Crypto Market Down?

Over the past day, crypto has moved closely with traditional risk assets. Bitcoin’s correlation with the S&P 500 is sitting near 66%, highlighting how macro forces are driving price action. As stocks sold off, crypto followed.

Markets sold off after speculation around the next Federal Reserve chair intensified. On January 31, focus shifted to Kevin Warsh, a hawkish figure who has pushed back against long-term quantitative easing.

Even if the reduction in interest rates is forthcoming, the anticipation of a slowdown in liquidity expansion was enough to unsettle investors, with risk assets responding immediately, with both stocks and crypto experiencing widespread selling.

Moreover, once prices started falling, heavy leverage in the system made the move worse. More than $784 million in Bitcoin long positions were liquidated in a 24-hour period, representing an increase of over 800% compared to the previous day.

Forced liquidations added immediate sell pressure, pushing prices lower and triggering additional liquidations in a cascading effect. Funding rates have flipped sharply negative, now sitting near -0.008%, showing how aggressively long positions were flushed from the market.

What might have been a controlled pullback quickly turned into a sharp downturn as leverage unwound across major exchanges.

Key Levels and What to Watch Next

Attention is now firmly on the $77,000 level for Bitcoin. This zone acted as a local bottom on January 31 and has become a critical near-term support area.

A break below $77,000 could pave the way for a move towards the $75,000-$76,000 level. But staying above it could provide a technical bounce towards the $82,000 region as selling dries up.

Another key factor is ongoing U.S. spot Bitcoin ETF flow data, which has shown net outflows in recent sessions. Net outflows show that institutional investors are withdrawing their funds, which could be a negative factor. When the net outflows turn positive, it could help stabilize market action and provide support for a bounce.

Read Also: Here’s Why Cardano (ADA) Got USDCx Instead of USDC

In addition, fueling market nervousness, the US Securities Exchange Commission is currently operating with limited staff due to a US government shutdown.

Coin Bureau shared on X that the agency has paused crypto exemptions and frozen certain tokenized securities filings. Divisions like Trading and Markets and Corporation Finance have been impacted, leading to a sense of regulatory uncertainty, especially when market sentiment is already weak.

Nonetheless, the current crypto market sell-off was not necessarily caused by a specific event, but rather macro forces. Renewed concerns regarding a potential for tighter monetary policies led to a risk-off move, and the high correlation between the crypto market and other markets caused the sell-off. 

High leverage also played a role, making the market sell-off sharper, especially as it was a liquidation-driven event.

The current market’s ability to hold its support at $77,000, coupled with upcoming ETF flow data, will play a crucial role in determining the direction of the market, whether it is a stabilizing event or another leg down.

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