• The crypto market crash of January 3 caused roughly $600 million in liquidations across the board.
  • This move was mainly influenced by Matrixport’s research, which indicated a possibility of ETF rejection.
  • The sudden nosedive wiped nearly $1 billion in open interest in just a few hours. 

The cryptocurrency ecosystem was hit with a massive spike in selling pressure that triggered $520 million worth of long positions and nearly $30 million worth of short positions to be liquidated. One of the main reasons why the crypto market dropped on January 3 was Matrixport’s blog that suggested a potential delay in ETF approval from the US Securities and Exchange Commission (SEC). 

Let’s break down the first major crypto market crash of 2024.

Also read: Grayscale BTC ETF filing keeps important details unrevealed a week before approval

Why did crypto drop?

On January 3, the first trading week of 2024, Matrixport, a popular digital asset company, posted a blog titled “Why the SEC will reject all Bitcoin spot ETFs.” This post authored by Markus Thielen, the Head of Research at Matrixport indicated that the filed ETFs were missing a critical requirement, which could cause the approval of Bitcoin spot ETFs to be pushed until the second quarter of 2024.

The research also noted, “The current five-person voting Commissioners leadership critical for the ETF approval of the SEC is dominated by Democrats. SEC Chair Gensler is not embracing crypto in the US, and it might even be a very long shot to expect that he would vote to approve Bitcoin Spot ETFs.”

The Matrixport research further added that a crash could wipe $5.1 billion in longs added due to the ETF approval news could be wiped. This move, in theory, should cause Bitcoin price to drop by 20% to anywhere between $36,000 and $38,000.

Also read: Michael Saylor begins selling $216M in MicroStrategy stocks for more Bitcoin

BTC/USD 1-minute chart

BTC/USD 1-minute chart 

Crypto crash and its after-effects 

Bitcoin price crashed from $45,308 to $41,454. This drop of 8.51% triggered nearly $600 million in positions to be liquidated, according to data from Coinglass. Additionally, the total open interest, which is the sum of all open positions, slumped from $18.66 billion to $17.72 billion. 

Coinglass liquidation, open interest

Coinglass liquidation, open interest

Additionally, the estimated leverage ratio also saw a steep decline due to the January 3 crypto crash. The estimated leverage ratio is the exchange's open interest divided by their coins reserve. This indicator has dropped from a peak of 0.23 to 0.17, representing an effective 50% reduction in leverage.

This flush in the estimated leverage ratio often suggests a reduction in risk and a potential bottom formation. 

Also read: Spot Bitcoin ETF update: The politics behind approvals according to investment bank TD Cowen

Will crypto market crash more?

The 365-day Market Value to Realized Value (MVRV) ratio currently sits at 33.15%, denoting that 33.15% of investors that purchased BTC over the past year are in profits. If these investors decide to book profits, it could catalyze another crash.

Hence, the 365-day MVRV ratio indicates that this crash could just be the start, especially if Matrixport’s forecast of the SEC rejection of Bitcoin spot ETFs is true. In case the ETFs are rejected until Q2 2024, BTC could repeat the 2019 mini-cycle and potentially catalyze a steep correction. 

While Matrixport’s targets for an ETF rejection are $36,000 to $38,000, a dire scenario could see BTC tag the $30,000 psychological level and potentially bottom by sweeping the equal lows at roughly $24,800.

BTC/USDT 1-week chart

BTC/USDT 1-week chart


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended Content

Editors’ Picks

Polygon joins forces with WSPN to expand stablecoin adoption

Polygon joins forces with WSPN to expand stablecoin adoption

WSPN, a stablecoin infrastructure company based in Singapore, has teamed up with Polygon Labs to make its stablecoin, WUSD, more useful in payment and decentralized finance.

More Cryptocurrencies News
Coinbase envisages listing of more meme coins amid regulatory optimism

Coinbase envisages listing of more meme coins amid regulatory optimism

Donald Trump's expected return to the White House creates excitement in the cryptocurrency sector, especially at Coinbase, the largest US-based crypto exchange. The platform is optimistic that the new administration will focus on regulatory clarity, which could lead to more token listings, including popular meme coins.

More Crypto News
Cardano's ADA leaps to 2.5-year high of 90 cents as whale holdings exceed $12B

Cardano's ADA leaps to 2.5-year high of 90 cents as whale holdings exceed $12B

As Bitcoin (BTC) gets closer to the $100,000 mark for the first time — it crossed $99,000 earlier Friday — capital is rotating into alternative cryptocurrencies, creating a buzz in the broader crypto market.

More Bitcoin News
Shiba Inu holders withdraw 1.67 trillion SHIB tokens from exchange

Shiba Inu holders withdraw 1.67 trillion SHIB tokens from exchange

Shiba Inu trades slightly higher, around $0.000024, on Thursday after declining more than 5% the previous week. SHIB’s on-chain metrics project a bullish outlook as holders accumulate recent dips, and dormant wallets are on the move, all pointing to a recovery in the cards.

More Shiba Inu News
Bitcoin: Rally expected to continue as BTC nears $100K

Bitcoin: Rally expected to continue as BTC nears $100K

Bitcoin (BTC) reached a new all-time high of $99,419, just inches away from the $100K milestone and has rallied over 9% so far this week. This bullish momentum was supported by the rising Bitcoin spot Exchange Traded Funds (ETF), which accounted for over $2.8 billion inflow until Thursday. BlackRock and Grayscale’s recent launch of the Bitcoin ETF options also fueled the rally this week. 

Read full analysis
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

BTC

ETH

XRP