Why is the crypto market down today?

The crypto market is down today after a sharp correction hit Bitcoin (BTC), Ether (ETH) and altcoins on Jan. 3. Bitcoin price dropped by 10%, nearly erasing all 2024 gains, before rounding to trade near $42,700.

Let’s take a closer look at the factors impacting Bitcoin price today.

A questionable spot Bitcoin ETF report jolts the market

Investors’ belief that the United States Securities and Exchange Commission (SEC) could approve one of the 14 outstanding spot Bitcoin ETF applications in early January sent BTC price over $45,000.

On Jan. 3, a report was released by a financial services platform asserting that the SEC plans to reject the spot Bitcoin ETFs. Within the hour following the report’s release, crypto prices crashed.

The price of $BTC plummeted ~10% in a short period as #Matrixport predicted in the latest research that the #SEC will reject Bitcoin Spot ETFs.#Coinglass data shows that a long order worth $14.26M was liquidated on #Huobi.https://t.co/MT0EgNW8ib pic.twitter.com/Es7X0Y5MAE

— Lookonchain (@lookonchain) January 3, 2024

While some analysts do not believe the report was the cause of the crypto market’s dip, citing technical price metrics, the timing has raised eyebrows.

The cryptocurrency industry and regulators have a long history of not getting along either due to various misconceptions or mistrust over the actual use case of digital assets. Such history has led analysts to believe that spot Bitcoin ETF applications will be rejected to buy the SEC more time in rendering a final decision.

Futures liquidations soar across the crypto market

The decline across major cryptocurrencies has led to a rush of liquidations across the derivative market. Regardless of whether the report caused the crash, bullish traders were caught off guard, leading to a quick spat of long liquidations.

Related: Cory Klippsten’s warning for ‘shitcoin traders’ in the bull market: X Hall of Flame

In the past 24 hours, over $577.7 million in long positions have been liquidated across the crypto market, with $554.5 million being wiped out in the previous 12 hours. Crypto market prices are negatively affected when long derivative positions are liquidated without buying pressure from trading volume.

Over 196,848 traders were liquidated with the largest single liquidation being a BTC and Tether (USDT) long valued at $14.26 million.

Related: 15 years, 90K ‘Bitcoinaires' — Bitcoin millionaire wallets jump 300%

Despite traders’ retaining positive sentiment, a widely recognized index shows a decrease over the previous month.

The sharp price decline is a reminder that volatility can return to the market at any moment.

Are you not entertained?

I fucking love bull market volatility. pic.twitter.com/OHbHfUmLzD

— Arthur Hayes (@CryptoHayes) January 3, 2024

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.