Bitcoin is down 2 percent, Ethereum nearly 7 percent, and some altcoins almost in double digits. The entire crypto market is correcting. The CMC100 index, which tracks the performance of the 100 largest cryptocurrencies, has fallen by 4.57 percent.

Within 24 hours, positions worth over 930 million US dollars were liquidated. More than 200,000 traders were affected, with Ethereum, Solana, and Dogecoin long positions hit the hardest.

Bitcoin daily chart
Bitcoin daily chart | Source: Coinmarketcap 

Bitcoin ETFs are seeing their longest streak of outflows since April. The movements appear to be driven mainly by retail investors, while institutional investors remain cautious.

Risk asset markets overall look weak: the S&P 500 and NASDAQ are moving sideways. Despite negative price action, large wallets continue to accumulate Ethereum, suggesting that professional market participants may expect a recovery in the medium term.

Market liquidity is drying up. The Federal Reserve’s Overnight Reverse Repurchase Agreement (O/N RRP) is nearly empty. The program was last at a similar low level in 2021. This shows that almost no excess capital is left in the system. Only a few institutions are still using the RRP program, a sign that market structure is changing and banks and funds are adjusting their liquidity strategies.

At the same time, the U.S. government is issuing more short-term Treasury bills (T-Bills) to raise fresh funds. These offer higher yields and draw capital away from markets, including cryptocurrencies.

If the Federal Reserve continues quantitative tightening and does not introduce new liquidity measures, a market squeeze similar to 2022 could occur. At that time, Bitcoin lost about 65 percent of its value.