Here’s why the crypto market is falling and liquidations rising

The crypto market remains under pressure this week, with Bitcoin and most altcoins trading well below their highest points this month.

Bitcoin (BTC) price was trading at $111,300 on Thursday, down from the highest point this month. Some of the top laggards on Thursday were tokens like Zcash, Bittensor, Aster, and Story. 

The ongoing crypto pullback has coincided with rising liquidations. CoinGlass data show 24-hour liquidations jumped 30% to $530 million.

Crypto market falling amid fear in the industry

One main reason the crypto market is falling and underperforming stocks is an ongoing sense of fear among traders. CoinMarketCap data show the Fear and Greed Index has moved to the fear zone at 32.

Traders are likely fearful after last week’s market crash that led to more than $19 billion in liquidations. Over 1.6 million traders were liquidated.

The impact is that many traders are staying away from the market as they wait for the next catalyst. For example, CoinGlass data show futures open interest has dropped to $161 billion from more than $233 billion last week. The 24-hour volume has fallen to $328 billion, down from a peak of $728 billion last week.

Weak crypto ETF inflows

The crypto market is falling this week as demand from Wall Street investors remain tepid. Data compiled by SoSoValue shows that spot Bitcoin ETFs have shed over $328 million this week. 

Similarly, spot Ethereum ETFs have shed over $22 million. Other top ETFs tracking popular cryptocurrencies like Solana, Dogecoin, and XRP have also had weak flows this week as fears of another crash remain.

In contrast, gold and silver ETFs have continued doing well this year as investors bet that the latter is a better safe-haven asset than Bitcoin.

Tariffs, inflation, and Federal Reserve

Another reason the crypto market is falling is the lingering fear that the trade war between the U.S. and China will continue. China has already threatened to implement tariffs on U.S. goods and block rare-earth metals exports.

A prolonged trade war would affect inflation, which may limit the speed of Federal Reserve interest rate cuts. Besides, inflation is still sticky, with the prices of most items higher today than in the past.