The cryptocurrency market crash that began during the Asian trading session on Monday led to a loss of $200 billion in market capitalization. Massive sell-offs of Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Binance Coin (BNB), Solana (Solana), and other altcoins erased recent gains driven by market expectations of a Federal Reserve interest rate cut in December.
Bitcoin (BTC) faced resistance near $92,000, plunging over 6% today to fall below $85,653. On the other hand, Ethereum (ETH) also dropped 8%, hitting a 24-hour low of $2,807. Despite the cryptocurrency market's fear and greed index rebounding from 11 last week to 24 today, the aforementioned situation still occurred.
Meanwhile, in the past 24 hours, mainstream altcoins such as XRP, BNB, Solana (SOL), Dogecoin (DOGE), Cardano (ADA), and Hyperliquid (HYPE) have fallen by 6% to 10%. Zcash (ZEC), Ethena (ENA), and AI coins led the cryptocurrency market crash, with ZEC's price plummeting by 21%.
The Bank of Japan's interest rate hike and record bond yields have led to a collapse in the cryptocurrency market.
The main reason for the cryptocurrency market crash is Governor Kazuo Ueda's speech on December 1, in which he hinted at a possible interest rate hike in December. Ueda stated that the Bank of Japan would decide whether to raise the policy interest rate based on an examination of the economy, inflation, and financial market conditions.
As a result, Japanese 30-year, 10-year, and 2-year government bond yields have risen to their highest levels since 2008. Meanwhile, the yield on Japanese 20-year government bonds (JP20Y) surged to 2.888%, reaching its highest level since 1999.
The rise in Japanese interest rates and the strengthening yen may lead to the liquidation of arbitrage trades. Since institutional investors like hedge funds borrow yen to purchase risk assets, this could trigger a global market crash.
The collapse of Bitcoin and the broader cryptocurrency market was driven by panic over the potential liquidation of yen arbitrage trades. Notably, global yen arbitrage exposure is as high as $20 trillion, which is enough to shake the entire market, including Bitcoin.
ISM U.S. Manufacturing PMI data release and Jerome Powell's speech today
The Institute for Supply Management will release U.S. Manufacturing Purchasing Managers' Index (PMI) data today, which will reveal the health of the U.S. manufacturing sector.
Notably, the ISM U.S. Manufacturing Purchasing Managers' Index (PMI) has contracted for the eighth consecutive month. The market expects the index to close at 48.6, highlighting the weak economic situation in the context of a prolonged government shutdown.
Additionally, Fed Chairman Jerome Powell is scheduled to speak at 8 PM Eastern Time at the Hoover Institution in California. Everyone is paying attention to Powell's speech today, hoping to find any hints or comments regarding a potential rate cut by the Fed in December.
As of the time of writing, the CME FedWatch tool shows an 87.4% probability that the Fed will cut rates by 25 basis points on December 10. Macroeconomic events leading up to this week's FOMC meeting could significantly alter the probability of a rate cut.
The cryptocurrency market has collapsed, with many cryptocurrencies such as Bitcoin, Ethereum, Ripple, Solana, and ZEC facing liquidation.
CoinGlass data shows that the total liquidation amount in the past 24 hours approached $700 million, with the highest liquidation amounts in Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Solana (SOL), Zcash (ZEC), Dogecoin (DOGE), and Hyperliquid (HYPE). Over 219,000 traders were liquidated, with the largest single liquidation order of ETHUSDC occurring on the Binance platform, amounting to $14.48 million.
Notably, nearly $600 million in long positions and $90 million in short positions were forcibly liquidated. As investors sold more than $200 million in Bitcoin in the past 24 hours, the price of Bitcoin plummeted to $85,000. Within just one hour of the cryptocurrency market crash, long positions worth $372 million were forcibly liquidated, while Bank of Japan Governor Kazuo Ueda also hinted at a possible interest rate hike.
Matrixport claims that the Fed's dovish stance may not be enough to offset tightening signals, leading institutional investors to continue to reduce their Bitcoin holdings. Meanwhile, Tether's significant increase in gold and Bitcoin holdings to compensate for falling interest income has raised concerns in the cryptocurrency community.
