The crypto market has experienced an unprecedented surge in volatility, with established coins like Bitcoin and Ethereum facing extreme price swings. Since January, the frequency of flash crashes has risen sharply , erasing billions from the market. A crypto analyst has suggested that these flash crashes have been driven by several factors, providing a detailed insight into what’s really going on in the market.
Why Flash Crashes Are Occurring In The Crypto Market
A crypto analyst known as ‘The Kobeissi Letter’ has shed light on the recent market crash and why top coins are falling drastically. The analyst revealed that the increasing number of flash crashes has resulted in over $300 billion being removed from the market in just 24 hours.
He disclosed that on the previous day, the market began selling off, with Bitcoin dropping below the $95,000 mark . Between src:45 AM ET and 2:src5 AM ET, the cryptocurrency had one of the most shocking crashes, falling by $5,000 in mere minutes.
Ethereum, the second largest cryptocurrency after Bitcoin, had it even worse. The altcoin experienced massive liquidations that contributed to a 37% price crash on February 2, fueled by trade war headlines.
Source: The Kobeissi Letter on X
The Kobeissi Letter has revealed that the key factor behind these dramatic flash crashes is the growing divide between institutional and retail investors . Wall Street Hedge funds have increased their short positions on Ethereum by 500% since November 2024, marking a historic level of institutional bearishness toward Ethereum. Short positioning in Ethereum has also increased by over 40% in just one week. Moreover, Ethereum’s price is down by approximately 40% since December 2024, while Bitcoin has fallen by src5%.
On the other hand, institutions have continued to accumulate Bitcoin , while retail investors have poured capital into smaller altcoins like Solana, creating extreme volatility in these assets. This “polarization,” as the analyst calls it, has led to the formation of “air pockets” in liquidity. As a result, when a sell-off starts, it triggers cascading liquidations, amplifying market instability and price crashes .
The analyst has also pinpointed that this polarization phenomenon works in the opposite direction, as the market can experience rapid recovery, leading to billions added to its market cap within hours.
Shifts In Sentiment And Political Influence Contribute To Market Crash
The Kobeissi Letter revealed that the Fear and Greed Index has fallen from a bullish stance just weeks ago to 29% extreme Fear , underscoring the speed at which the market’s sentiment is changing to the negative. The analyst suggests that the extreme positioning in the crypto market is leading to these increasing flash crashes, making crypto significantly unpredictable.
Adding to the turbulence, the analyst revealed that political and corporate influences have been dictating the crypto market. He underscored that Eric Trump had publicly supported buying Bitcoin and Ethereum during dips, aligning with events like Ethereum’s February 3 recovery and Bitcoin’s rebound on February 25.
While the market experiences flash crashes and instability, MicroStrategy continues to accumulate Bitcoin. The analyst revealed that the company had also contributed to the polarization of Bitcoin due to its unending accumulation trend . While the company buys more Bitcoin, MSTR stocks continue to fall, marking a 45% decline from their high on November 20.
Total crypto market at $2.86 trillion | Source: TOTAL on Tradingview.com
Featured image from Unsplash, chart from Tradingview.com
Scott Matherson
Scott Matherson is a prominent crypto writer at NewsBTC with a knack for capturing the pulse of the market, covering pivotal shifts, technological advancements, and regulatory changes with precision. Having witnessed the evolving landscape of the crypto world firsthand, Scott is able to dissect complex crypto topics and present them in an accessible and engaging manner. Scott’s dedication to clarity and accuracy has made him an indispensable asset, helping to demystify the complex world of cryptocurrency for countless readers.
Scott’s experience spans a number of industries outside of crypto including banking and investment. He has brought his vast experience from these industries into crypto, which allows him to understand even the most complex topics and break them down in a way that is easy for readers from all works of life to understand. Scott’s pieces have helped to break down cryptocurrency processes and how they work, as well as the underlying groundbreaking technology that makes them so important to everyday life.
With years of experience in the crypto market, Scott began to focus on his true passion: writing. During this time, Scott has been able to author countless influential pieces that have drawn in millions of readers and have shaped public opinion across various important topics. His repertoire spans hundreds of articles on various sectors in the crypto industry, including decentralized finance (DeFi), decentralized exchanges (DEXes), Staking, Liquid Staking, emerging technologies, and non-fungible tokens (NFTs), among others.
Scott’s influence is not just limited to the countless discussions that his publications have sparked but also as a consultant for major projects in the space. He has consulted on issues ranging from crypto regulations to new technology deployment. Scott’s expertise also spans community building and contributes to a number of causes to further the development of the crypto industry.
Scott is an advocate for sustainable practices within the crypto industry and has championed discussions around green blockchain solutions. His ability to keep in line with market trends has made his work a favorite among crypto investors.
In his personal life, Scott is an avid traveler and his exposure to the world and various way of life has helped him to understand how important technologies like the blockchain and cryptocurrencies are. This has been key in his understanding of its global impact, as well as his ability to connect socio-economic developments to technological trends around the globe like no one else.
Scott is known for his work in community education to help people understand crypto technology and how its existence impacts their lives. He is a well-respected figure in his community, known for his work in helping to enlighten and inspire the next generation as they channel their energies into pressing issues. His work is a testament to his dedication and commitment to education and innovation, as well as the promotion of ethical practices in the rapidly developing world of cryptocurrencies.
Scott stands steady in the frontlines of the crypto revolution and is committed to helping to shape a future that promotes the development of technology in an ethical manner that translates to the benefit of all in the society.
Disclaimer: The information found on NewsBTC is for educational purposes
only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any
investments and naturally investing carries risks. You are advised to conduct your own
research before making any investment decisions. Use information provided on this website
entirely at your own risk.
No responses yet