Crypto Market Retreats Amid Record Liquidity and Signs of Froth

The American money supply has risen to a record high, but crypto markets continue to extend their decline and move at a tide of rising liquidity.

The M2 money quantity in the US increased by 4.5% on an annual basis in June to a record of $ 22.02 trillion, the Kobeissi letter wrote in a tweet On Thursday.

The broad degree of money in circulation often correlates with asset prices, because increased liquidity tends to flow into markets, which increases inflation and valuations together with the valuations.

So what gives?

Derek Lim, head of research at Caladan, a crypto-market and trade agency, said Decrypt That the American liquidity “has currently been merged, not used”.

A significant part of the $ 22 trillion is “sitting on money markets or treasure chest of short duration, not in risk assets”, essentially “dry powder” that has not yet been converted into “risk-on capital”.

Although it is a popular conviction that Bitcoin follows this statistics, the crypto market capitalization has shifted $ 117 billion since Wednesday and drops from his peak of $ 4.05 trillion.

Analysts Decrypt spoken earlier to insist in the short term and to attribute current volatility market fatigue And make a profit.

“We see increased option activity and increasing liquidation risk,” said Daniel Liu, CEO of Republic Technologies, said Decrypt. “Small price shifts can now squeeze tracading liquidations or short, depending on the direction.”

A step -by -step liquidation is a chain reaction of forced sales. A short squeeze occurs when there is a rapid price increase that forces traders who bet on a price drop to buy back, which further accelerates the direction of the price.

Altcoin leverage

Caladan’s Lim pointed to a “huge amount of lever lungs, especially in Altcoins”, as the most important contribution to the current sale. The expert said that the “$ 89 million long liquidation” of XRP was a clear example of accelerating “forced selling”.

“Even with loose liquidity, the risk -sentiment is cooling,” Lim, adding that traders “probably wait for clarity before they put their money back to work.”

Bitcoin’s 3% slide since Thursday’s peak has led to large altcoins such as Ethereum, Solana and XRP, respectively, 4.8%, 6.2% and 7.1%, according to data from Coetecko.

Ethereum is confronted with a “$ 260 million in ASK-SIDE Supply”, or the total volume of sales orders available at various prices at fairs, which must be deleted for a clean break above $ 4,000, says Liu.

The upward trend could slow down as “taking a profit continues”, he added.

Solana, on the other hand, is more “vulnerable” with an increased risk of liquidation, because “Leverage is currently exceeding the demand for spot.”

Despite the warning signals, LIM said that it “looks more like a healthy correction, without proof of a cycle-ending breakdown.”

Following that sentiment, LiU suggests, the current market rescue in the midst of the record in the US liquidity can be short -lived.

“We have just come from a huge price rally and the market needs time to consolidate,” he explained. “Expect volatility in the short term, but the long -term dissertation remains intact.”