Although the market is yet to close, it is safe to say that January 21 did turn into the ‘Black Friday’ of the month. With the overall market losses running up to $137 billion in the last 24 hours, here are the possible reasons as to why it could have happened.
1. Bitcoin-led Market Liquidations
The market witnessed one of the highest ever single-day liquidations today as, since the opening of the market to the time of this report, almost $880 million worth of liquidations had been recorded.
Leading this was Bitcoin which registered close to $175 million liquidated contracts.
This is one of the biggest driving factors when it comes to a market crash. In the past too on every major liquidation, Bitcoin created a huge red candle creating a cascading effect on the rest of the market (ref. Bitcoin Price Action image).
2. Russia’s Crypto Ban
Today one of the biggest economies in the world proposed banning the use and mining of cryptocurrencies on Russian territory.
According to them, cryptocurrency acted as a threat to financial stability, and reasons pertaining to citizens’ wellbeing and its monetary policy sovereignty drove the ban.
This was one of the biggest blows to the global crypto market after China’s ban since Russia is the world’s third-largest Bitcoin miner which also raised environmental concern. The bank explicitly stated:
“The best solution is to introduce a ban on cryptocurrency mining in Russia”
3. The Dip of Wall Street
USA’s stock market has had a significant impact on the crypto market in the past and for the same reason, it won’t be surprising if that would be the case today as well. The S&P 500 Index over the course of 72 hours has lost almost 4%.
Plus since Bitcoin and the SPX share a correlation as high as 0.59, the dips were bound to affect one another and so possibly it did.
What About the Top Coins?
At the time of this report pretty much all of the top 10 cryptocurrencies have within the 10% with Bitcoin losing almost 7.83%. Not only did it lose its support of $40.5k, but it also tested the critical level of $38k.
Fortunately, BTC managed to keep above it trading at $38,310 at press time and as long as it maintains movement in that zone, the market will be safe.