Crypto analyst Ali MartÃnez has provided some insight into why Bitcoin, Ethereum and Dogecoin prices are crashing. The crypto market has seen a decline in recent days after starting the year on a high.
Why Bitcoin, Ethereum and Dogecoin prices are crashing
In one X contributionMartinez revealed why the prices of Bitcoin, Ethereum and Dogecoin are crashing. He explained that capital inflows into the Crypto market have declined over the last month, falling from $134 billion to $58 billion. The crypto analyst added that this indicates a significant decline in investment activity.
There is simply a lack of liquidity in the crypto market, which has caused Bitcoin, Ethereum and Dogecoin prices to crash. Bitcoin led this downtrend and subsequently fell as low as $92,000 Price recovery above $100,000 at the beginning of the year. Due to their strong price correlation with the flagship cryptocurrency, Ethereum and Dogecoin have followed suit and suffered a similar downtrend.
The lack of inflows into the crypto market is likely due to the bearish sentiment among investors triggered by developments on the macro side. The recent strong US labor market data dampened hopes of an early recovery Fed interest rate cut. Instead, traders are now predicting that there will only be one rate cut this year, probably in October.
This represents a bearish outlook for Bitcoin, Ethereum and Dogecoin prices as investors will be less likely to invest in these risky assets without such quantitative easing measures.
Rate cuts typically lead to an increase in liquidity, giving investors the confidence to invest in risky assets like cryptocurrencies. For comparison, last year there were three interest rate cuts from the Fed, which gave the crypto market a huge boost Bitcoin rose above $100,000 for the first time in its history.
Other on-chain metrics also highlight the bearish sentiment
There are other on-chain metrics that illustrate 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 of large transactions on the BTC network has declined by 51.64% in the last month, from 33,450 to 16,180. The crypto analyst added that this could indicate a significant decline in whale activity.
A decline in whale activity is bearish for Bitcoin, considering how this category of investors incorporate the flagship cryptocurrency into price discovery as it accumulates. Therefore, BTC is bound to crash and these whales are choosing to stay on the sidelines until market conditions improve.
Meanwhile, Martinez revealed that Bitcoins Network activity has fallen to its lowest level since November with just 667,100 active addresses. This once again underlines the current pessimistic mood among investors.
Featured image created with Dall.E, chart from Tradingview.com