The cryptocurrency market faced significant downturns over the past 24 hours, driven by a sharp decline in Bitcoin (CRYPTO:BTC) and AI-related tokens.
Bitcoin's price dropped more than 4% to a daily low of $55,746 before rebounding to around $56,623 during early European trading on Wednesday.
The altcoin sector, led by AI-focused crypto projects, also saw substantial losses, with a decline of over 7%.
This resulted in nearly $200 million being liquidated in leveraged crypto trades, predominantly affecting long positions.
Several factors contributed to the recent crypto market slump.
One major factor is the rising fear of a "September capitulation."
Following a bearish close to August, the crypto market confirmed a macro correction trend that began in early March.
Bitcoin’s technical charts show a pattern of lower highs and lower lows over the past five months, indicating that bearish sentiment prevails.
The fear and greed index for Bitcoin remains below 30, reflecting heightened fear of further market capitulation.
Historical data suggests that Bitcoin and the broader crypto market tend to perform poorly in September, particularly in years following a BTC halving event.
Another contributing factor to the market downturn is the sell-off in major stock markets, including Japan's Nikkei 225, the S&P 500, and the Nasdaq Composite Index.
Losses led by tech giant Nvidia, due to regulatory challenges, have negatively impacted the crypto market, especially AI-focused tokens.
Additionally, low demand for U.S.-based spot Bitcoin (BTC) and Ethereum (CRYPTO:ETH) ETFs has further weighed on the market.
On Tuesday, spot Bitcoin ETFs in the U.S. recorded their largest single-day outflow in months, with around $287 million in net cash outflows, led by Fidelity’s FBTC.
Similarly, spot Ether ETFs saw a net outflow of approximately $47 million, marking a trend of reduced interest in these financial instruments.
This lack of demand reflects broader concerns about the market's near-term prospects amid ongoing economic and regulatory uncertainties.