Why is the crypto market going down? (Nov. 14)

The crypto market extended its downturn for a third straight day on Friday, Nov. 14, weighed down by mounting macroeconomic headwinds and Bitcoin’s drop below the $100k psychological support level.

Over the past 24 hours, the total cryptocurrency market cap dropped 3.8% to $3.42 trillion, wiping out nearly $130 billion in value, and extending its downtrend for the third straight day, which saw its value dip by nearly 6.6% from its Nov. 11 high of $3.66 trillion.

Bitcoin (BTC), the bellwether crypto asset, dropped 4.2% in the day to an intraday low of $97,117 before settling at $97,523 at press time. At this price, it is down nearly 9.1% from its Tuesday high of $107,357, which came after the U.S. government declared an end to the shutdown that had delayed key economic data releases and frozen several regulatory and administrative functions critical to investor sentiment.

Ethereum (ETH) was hit even harder, dropping 8.6% over the day to trade at $3,176 at the time of writing. Other large-cap cryptocurrencies, including XRP (XRP), Solana (SOL), Dogecoin (DOGE), and Cardano (ADA), also posted steep losses ranging between 6% and 8%. Nearly all of the remaining top 100 cryptocurrencies by market cap were deep in the red as well.

Market sentiment at press time reflected growing caution, with most investors pulling back and engaging in profit-taking after the legacy crypto asset lost the $100k level, a key psychological support.

Analysts believe that this breakdown has confirmed the start of a prolonged bear market. At press time, BTC was down nearly 22.8% from its yearly high of $126,080 reached on Oct. 7 this year.

The Crypto Fear and Greed Index, commonly used as a gauge for overall crypto investor sentiment, has risen by one point from yesterday to 16 at the time of writing, but still remains in the “Extreme Fear” territory.

The crypto market fell as investors remained in a wait-and-watch mode after the U.S. government officially ended the shutdown on Nov. 12, marking the longest in the nation’s history.

While this reopened key federal operations and unblocked delayed economic data, investors likely focused on the damage already done. The disruption has prompted the Federal Reserve to adopt a more cautious stance toward another potential interest rate cut this year.

According to the CME FedWatch Tool, the odds of a 25bps December rate cut have dropped to 52%, while a separate poll on Polymarket shows the probability at just 53%, down from over 80% at the start of November.

Exaggerated expectations of a hawkish stance from the Fed have historically led to downside pressure across risk assets, including cryptocurrencies like Bitcoin. As yields on safer assets such as Treasury bonds become more attractive, capital often rotates away from volatile markets, weakening demand for crypto during periods of tightening monetary policy.

Rising liquidations and renewed crypto ETF outflows

Investor appetite has also been severely impacted by a wave of forced liquidations across the cryptocurrency derivatives market.

Data from CoinGlass shows that over $1 billion in crypto positions have been liquidated in the past 24 hours alone, with long positions accounting for $895 million of that total. A liquidation occurs when an exchange closes a trader’s position due to insufficient margin to cover potential losses. This typically adds selling pressure to an already weakening market.

To recall, the crypto market lost nearly $2 billion in a single day last month after over $20 billion in leveraged positions were liquidated, wiping out as many as 1.6 million traders in one session.

Meanwhile, institutional demand for crypto ETFs has continued to fade, adding to the bearish sentiment.

According to data from SoSoValue, U.S. spot Bitcoin ETFs saw nearly $870 million in net outflows over the past day, pushing total outflows in November to $1.84 billion. In contrast, these investment products had attracted $3.42 billion in inflows during the month of October.

Ethereum ETFs are faring even worse. They have seen no inflows this week, after losing $550.67 million in the current period, following last week’s $507.83 million in redemptions. Over the past five weeks, Ethereum-focused ETFs have lost around $1.6 billion in assets, a clear sign of waning demand across the board.