The cryptocurrency market took a significant hit as the S&P 500 plunged by over 2% on Tuesday, triggering widespread liquidations. Bitcoin, the flagship cryptocurrency, was not spared, dropping 4.5% to $56,500. This sharp decline has fuelled speculation of a possible larger crash, with some analysts predicting that Bitcoin could face an even steeper fall in the coming weeks. As the broader financial market remains volatile, many wonder: Is a 75% Bitcoin crash on the horizon?
Key Takeaways:
S&P 500 Crash Triggers Bitcoin Liquidations: A 2.12% drop in the S&P 500 led to a 4.5% decline in Bitcoin, causing over $246 million in liquidations.
Stochastic RSI Signals Bearish Trend: The Stochastic RSI on Bitcoin’s two-month chart points to a potential 75% crash, following similar historical patterns.
Institutional Outflows Rise: Bitcoin ETFs saw $287 million in outflows, signaling reduced institutional confidence and increasing fears of a market downturn.
Federal Reserve Rate Decision Looms: All eyes are on the Fed’s interest rate cut on September 18, which could determine Bitcoin’s next move.
Bitcoin Crash Linked to S&P 500 Fall
Bitcoin has often been correlated with the stock market, especially in times of heightened volatility. The S&P 500’s fall of 2.12% on Tuesday sent ripples through the crypto market, exacerbating an already fragile sentiment among investors. The drop in BTC price has led to a surge in long liquidations, with data from Coinglass revealing that approximately $246.64 million worth of leverage has been wiped out in less than 24 hours.
This sharp decline in the Bitcoin price is closely tied to the broader market reaction to the US Department of Justice (DoJ) subpoena issued to Nvidia. As the tech giant’s stock plummeted by 10%, major stock indices like the S&P 500 followed suit, dragging Bitcoin and other cryptocurrencies along. Market watchers are now questioning whether the selling pressure will ease or if Bitcoin is headed for more severe corrections.
Stochastic RSI Points to Major Decline
Adding to the concerns of a potential Bitcoin crash is the bearish signal indicated by the Stochastic Relative Strength Index (RSI) on Bitcoin’s two-month chart. This technical indicator, which has accurately predicted past declines, shows a shift from bullish to bearish momentum. Historically, similar signals have been precursors to major corrections, with Bitcoin often losing up to 75% of its value during such downturns.
Prominent crypto analyst Ali Martinez shared insights on the situation, stating that Bitcoin could experience a massive correction if it continues to follow historical patterns. If these predictions hold true, Bitcoin could face one of its largest crashes, sending its price spiralling downward.
Liquidation Surge Fuels Bitcoin Crash Concerns
The increase in liquidations further compounds the bearish outlook for Bitcoin. As the price continues to fall, long positions are being liquidated at an alarming rate. This liquidation trend not only affects the Bitcoin market but also drags down altcoins, contributing to a broader sell-off across the cryptocurrency space.
Spot Bitcoin ETFs, which have seen significant inflows in recent months, have also experienced a sharp outflow, with $287 million exiting on Tuesday. The sudden outflow indicates that institutional investors are pulling back, further stoking fears of a major Bitcoin crash.
Could Bitcoin Face a 75% Decline?
While the immediate future for Bitcoin looks uncertain, some analysts remain cautious but optimistic. Peter Brandt, a veteran trader, highlighted Bitcoin’s lack of momentum, noting that the market structure shows a series of lower highs and lower lows. This indicates a bearish trend, but it does not necessarily confirm a 75% decline.
However, with the Stochastic RSI showing bearish signals and liquidations mounting, Bitcoin could still face a deeper correction. If the price fails to hold above key support levels, the cryptocurrency might experience significant losses in the coming weeks.
What to Watch Next
All eyes are now on the US Federal Reserve and its upcoming interest rate decisions. Investors will be closely monitoring the next Federal Reserve meeting on September 18, where the central bank is expected to cut interest rates by 50 basis points. Should the Fed take a more dovish stance, it could provide some relief to the crypto market. However, if economic data disappoints, further downward pressure on Bitcoin could be inevitable.
Moreover, Bitcoin ETF outflows and ongoing selling pressure in the tech sector will play a crucial role in shaping the market direction. With Bitcoin's price hovering near critical levels, traders are preparing for increased volatility.
Conclusion
The recent S&P 500 decline has had a profound impact on Bitcoin and the broader cryptocurrency market. With liquidation levels surging and technical indicators signalling further weakness, Bitcoin faces the possibility of a major crash. While a 75% drop remains speculative, the bearish trend is clear. As the Federal Reserve prepares to adjust its monetary policy and market sentiment remains fragile, Bitcoin’s future hangs in the balance.
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