The crypto market opens the day in the red as disappointing US macroeconomic data is followed by a sell-off in the stock market.
The cryptocurrency market took another hit on Sept. 3, with the total market capitalization dropping by over 1.5% to about $2.03 trillion. This plunge has left many market participants questioning the core catalysts behind this downturn, and how much longer it may continue.
Let’s look at the factors driving the crypto market down today.
Cryptocurrency prices dive on weak manufacturing data
The crypto market is selling off, mirroring the weakness witnessed in US equities with the with the S&P 500 seeing its worst slump since the Aug. 5 market meltdown.
The S&P 500 was down 1.8% two hours after the Wall Street open on Sept. 3, while the Dow Jones indeed was down 563 points, or 1.4%. The Nasdaq Composite index slid 2.9%.
Similarly, crypto prices flashed red, with Bitcoin BTC $56,491 dropping 1.6% over the last 24 hours to trade at $57,713 at the time of publication. Ether ETH
$2,401 was down 3.4% to $2,441.
The correction in equities and digital assets followed yet another weak Supply Management (ISM) manufacturing survey, though stocks were already falling prior to the print. The market may have been poised for a correction after displaying strength toward the end of August.
“US manufacturing has officially contracted for the 5th consecutive month, to 47.2 points,” declared capital markets commentator the Kobeissi Letter in a Sept. 3 post on the X social media platform.
The ISM survey on Sept. 3 showed that the PMI index missed expectations of 47.5 points for August. New orders fell to 44.6 points from 47.4 in July, experiencing contraction for the 3rd straight month.
These prints implied that the US supply market is actually weaker than expected, with rising expectations that the Federal Reserve will cut rates in its next FOMC meeting.
The debate now is on the size of that Fed cut – with futures markets convinced of at least a quarter-point move on Sept. 18 and pricing about a 37% chance of a larger reduction of 50 basis points, according to the CME FedWatch tool.
Critical to that rate cut expectation will be the August payrolls report scheduled for Sept. 6, with consensus forecasts for a pick-up in jobs growth to 160,000 in August and a retreat in the jobless rate to 4.2%.
$100 million in liquidations rock the crypto market
The downturn in the crypto market on Sept. 3 coincides with accelerated long liquidations across derivatives markets, overpowering the short ones in the last 24 hours.
Data from CoinGlass reveals that long traders—those betting on the crypto market’s upside—have witnessed a total of $65.08 million worth of liquidations in the last 24 hours. In comparison, short traders suffered over $35.24 million in liquidations in the same period.
Ether liquidations reached $21.9 million over the last 12 hours, with over $27 million worth of cumulative leveraged long positions liquidated on the day, according to Coinglass data. Long Bitcoin liquidations stand at $18.44 million over the last 12 hours, with the tally increasing at the time of publication.
When long positions are liquidated, traders who are betting on prices going up are forced to sell their positions, often at a loss. This increased selling pressure has driven the crypto market valuation lower today.
Meanwhile, the OI reduction signals a decrease in active futures contracts, indicating that traders are closing their positions and stepping back from the market.
Nonetheless, funding rates of most top coins, including Bitcoin and Ether are positive, indicating that traders still in the market are generally more bullish, as they are willing to pay more to maintain long positions.
A weakening market structure points to a deeper correction
From a technical standpoint, today’s crypto market declines are part of a correction inside its prevailing descending parallel channel pattern. For instance, the market capitalization has dropped 27% since turning down from $2.734 trillion in March.
The downtrend has seen the TOTAL crypto market capitalization lose crucial support levels, including the $2.2 trillion mark and the middle boundary of the declining channel at $2.108 trillion.
Looking forward, the position of the relative strength index at 45 asserted the bears’ increasing dominance in the market. If the sell-side activity continues, the crypto market valuation may drop further toward the $1.875 trillion market over the next few weeks.
Conversely, a break above the middle trendline would likely push the crypto market cap toward the upper trendline, which is around $2.341 trillion.
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