The cryptocurrency market has experienced a significant decline in recent days, with the total market capitalization dropping to $2.6 trillion.
Bitcoin (BTC), the largest cryptocurrency by market capitalization, has fallen from $71,800 to around $69,100. Meanwhile, Ether (ETH), the second-largest cryptocurrency, has also dropped by about 4% and is currently trading around $3,700 at the time of writing.
Notably, various altcoins have plummeted by 20% to 30%, leading to significant liquidations among investors.
Why Did the Cryptocurrency Market Plunge Over the Weekend?
The cryptocurrency market experienced its second consecutive day of decline on June 7, as investors reacted to unexpectedly strong U.S. employment data, suggesting that the labor market is coping with tighter fiscal policies better than anticipated.
On June 7, the U.S. Department of Labor reported a significant increase of 272,000 jobs in May, far exceeding the expected 185,000 and substantially higher than the 165,000 jobs added in April.
The unemployment rate rose to 4.0% in May, marking the first increase since January 2022, compared to forecasts of 3.9% and April’s rate of 3.9%.
This robust employment data has likely diminished the probability of the Federal Reserve (Fed) lowering interest rates — a critical factor for the influx of liquidity into risk assets like cryptocurrencies.
The Federal Open Market Committee (FOMC) is scheduled to meet on June 12 to discuss interest rates, and the market currently holds low expectations for rate cuts in the next two meetings.
Over $380 Million Liquidated in the Cryptocurrency Market on June 7
The liquidation of long versus short positions in the broader cryptocurrency market has exacerbated the decline in digital asset prices today.
Significantly, the crypto derivatives market saw over $387.83 million in liquidations on June 7, 2024, with $348 million of these being long positions.
In the past 24 hours, more than 133,576 traders were liquidated, with the largest single liquidation order occurring on the OKX exchange, involving an ETH/USD swap worth $5.20 million.
When long positions are liquidated, this typically involves the selling of assets (either voluntarily or by the broker), which can further drive prices down.