The digital assets market is going through a period of severe turbulence. Since the start of the month, global capitalisation has begun a sharp decline, giving up a further 2.3% between Wednesday and Thursday, to stand at around $2.6 trillion. Bitcoin and Ethereum have not been spared, posting falls of 3.66% and 3.9% respectively on the day.
This correction can be explained by a combination of technical and macroeconomic factors that are weighing on the confidence of professional investors.
Evaporating liquidity
The first observation is that liquidity is drying up. The absence of new capital inflows is leaving the way open for increased volatility, fuelled by aggressive "leverage hunting". The figures speak for themselves: $872m of liquidations were recorded in 24 hours.
On the institutional vehicle side, the trend is just as volatile. While Monday gave hope of a rebound with $564 million in net inflows into crypto ETFs, this optimism was dashed by massive outflows totalling $864 million on Tuesday and Wednesday. This was compounded by selling pressure from long-term holders (LTHs), who offloaded 1,300 BTC yesterday (around $97 million).
Dollar strengthens, AI worries
The macroeconomic backdrop offers little respite. Global geopolitical tensions and the "Kevin Warsh effect" (pointing to tighter-than-expected monetary policy) are supporting the greenback. The DXY index is up 0.65% since Monday, mechanically penalising risky assets.
More structurally, a wind of suspicion is blowing over the technology sector. Investors are now questioning the real profitability of the massive investments in artificial intelligence.
The sector's heavyweights (Nvidia, Microsoft, AMD, Tesla) have suffered notable corrections, with the market fearing that record order books will not translate into actual revenues as early as this year. Competition from new players such as Anthropic is adding to this uncertainty about the sustainability of the sector's growth.
What's the outlook?
The signal is clear: market sentiment has shifted. The phase of monetary easing that began in early December remains too timid for the time being to reverse the trend. Historically, it takes six to twelve months for the effects of such a policy to really irrigate growth assets.
In the immediate term, the market remains structurally fragile. While this decline creates technical opportunities, above all it imposes renewed caution in the face of an environment where cash is, temporarily, once again king.
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