Why is crypto market crashing? Top reasons to know if you are an investor

Cryptocurrency market, including Bitcoin and Ether, have been witnessing a downfall. Is it a market correction? If it is then how long will it continue? These are the frequently asked questions on the social media. Bitcoin continued its slide, falling another 2.3 per cent to $105,715. The original cryptocurrency has declined more than 15 per cent in the past 10 days as holders retreat for safer investments. The world's largest cryptocurrency hit a record high above $126,000 on October 6. Ether, the second-biggest digital currency, is also witnessing a slide.

Earlier this week, Bitcoin and ether tumbled as U.S.-China tension ramped up, wiping out a rally the day before that was fueled by President Donald Trump's conciliatory trade remarks. Altcoins, a term for all cryptocurrencies other than market-leader bitcoin, bore the brunt of the move, with many falling 80 per cent on some exchanges, analysts said.

Today's price action came days after the crypto market experienced the largest liquidations in history, with more than $19 billion wiped out across leveraged positions late on Friday last. The crash came after Trump said he would impose 100 per cent tariffs on Chinese imports, in response to China announcing a major expansion of its rare earths export controls.


Crypto investors were bracing for more volatility and further declines in bitcoin and ether, aggressively positioning in trades that offer protection against another potential freefall.

Data from Derive.xyz, a crypto options trading platform, showed heavy "put" buying from traders in bitcoin and ether, which suggested hedging against potential downside risks.

In bitcoin, there were hefty purchases of puts conferring the right to sell bitcoin at strike prices of $115,000 and $95,000 for the October 31 expiry, according to Dawson. There was also a sharp reversal from call buying to call selling at the $125,000 strike for the October 17 expiry, suggesting a bearish short-term view.

Calls in the options market reflect expectations that the price will increase.

For ether, Nick Forster, Derive.xyz co-founder, said traders focused on the $4,000 strike for the October 31 expiry and $3,600 strike for the October 17 expiry. He also noted substantial buying of $2,600 puts for the December 26 expiry. Those strikes, he said, are indicative of growing bearish sentiment through year-end.

FAQs

Q1. What do we know about Ether?
A1. Ether is the second-biggest digital currency.

Q2. What do Crypto investors face?
A2. Crypto investors were bracing for more volatility and further declines in bitcoin and ether, aggressively positioning in trades that offer protection against another potential freefall.