Cryptanalyst Ali Martinez has provided some insights into why Bitcoin, Ethereum and Dogecoin prices are crashing. The crypto market has been on the decline for the past few days after starting the year on a high.
Why Bitcoin, Ethereum and Dogecoin Prices Are Crashing
In one X postsMartinez revealed why Bitcoin, Ethereum and Dogecoin prices are crashing. He stated that capital inflows to crypto market has declined over the past month, from $134 billion to $58 billion. The crypto analyst added that this points to a significant reduction in investment activity.
There has simply been a lack of liquidity in the crypto market, causing Bitcoin, Ethereum and Dogecoin prices to crash. Bitcoin has led this downtrend, dropping to as low as $92,000 after that prize recovery over $100,000 at the beginning of the year. Given their strong price correlation with the flagship crypto, Ethereum and Dogecoin have followed and suffered a similar downward trend.
The lack of inflows into the crypto market is likely due to the bearish sentiment among investors triggered by developments on the macro side. Recent strong US jobs data dampened hopes of an imminent one Fed rate cut. Instead, traders are now predicting that there will only be one rate cut this year, likely in October.
This provides a bearish outlook for Bitcoin, Ethereum and Dogecoin prices as investors are less inclined to invest in these risky assets in the absence of such quantitative easing.
Interest rate cuts usually lead to an increase in liquidity, giving investors the confidence to invest in risk assets such as cryptocurrencies. For context, there were three Fed rate cuts last year, which gave a huge boost to the crypto market which Bitcoin rose above $100,000 for the first time in its history.
Other Onchain metrics also highlight bearish sentiment
There are other on-chain metrics that highlight the bearish sentiment in the crypto market and explain why Bitcoin, Ethereum and Dogecoin prices have crashed. In another X post, Martinez revealed that the number large transactions on the BTC network has decreased by 51.64% in the past month, falling from 33,450 to 16,180. The cryptoanalyst added that this may indicate a significant decrease in election activity.
A decrease in Whale activity is bearish for Bitcoin, given how this category of investors puts the flagship crypto in price discovery as they accumulate. As such, BTC will crash, with these whales choosing to stay on the sidelines until market conditions improve.
At the same time, Martinez revealed that Bitcoins network activity has dropped to its lowest level since November, with just 667,100 active addresses. This again highlights the current bearish sentiment among investors.
Featured image created with Dall.E, charts from Tradingview.com
