During early Asia trading time, the crypto market experienced a drastic decline. According to CoinGecko, the total crypto market capitalization has dropped by 12.5%, now standing at approximately $1.97 trillion.

This marks the first time since mid-February that the market cap has fallen below the $2 trillion mark.

Fed’s Rate Stance Spurs Speculation on Emergency Cuts Amid Market Jitters

Bitcoin, the largest cryptocurrency by market capitalization, saw its price drop below the $60,000 mark, now trading at $53,399. This figure represents a 10.8% decrease in the last 24 hours.

Similarly, Ethereum, the second-largest cryptocurrency, witnessed a significant decline of 21.2% over the same period. It is now trading at $2,306 after momentarily dipping to $2,240.

Ethereum’s sharp decline has had a ripple effect across its ecosystem. On-chain data reveals that as Ethereum’s price fell to nearly $2,100, the maximum gas fee reached 710 gwei, with the current average at 350 gwei. Crypto journalist Colin Wu noted that if Ethereum’s price dips further, it could trigger massive liquidations in DeFi protocols.

“When Ethereum fell to $1,950, $92.2 million of crypto assets in the DeFi protocol would be liquidated; when $1,790, $271 million DeFi assets would be liquidated,” Wu said.

The broader impact of today’s drop is also evident in the liquidation numbers. According to Coinglass, the liquidation amount for the last 24 hours has exceeded $800 million, with $699.45 million from long positions and $100.56 million from short positions. The largest single liquidation occurred on Huobi with a BTC-USD pairing valued at $27 million.

Total Crypto Liquidations. Source: Coinglass

The fear and greed index for the crypto market has plummeted to 26, indicating a state of “fear.” This metric reflects the overall market sentiment, which has become increasingly bearish.

Many industry experts attribute the recent drop to the recent macroeconomic developments. The Bank of Japan’s unexpected hawkish stance last week, coupled with the US Federal Reserve’s cautious approach to rate cuts, has further fueled market uncertainty.

Despite market expectations, the Fed’s reluctance to cut rates in September has heightened the rush for safe investments due to weak US economic data. This gesture has intensified worries that the Fed is late in adjusting rates, necessitating aggressive monetary policy easing to prevent a recession.

However, many crypto traders believe the current situation could prompt the Fed to make an emergency rate cut in 2024. Data from the prediction market Polymarket shows that the odds of a Fed emergency rate cut have increased by 11% in the last 24 hours.