The cryptocurrency market has been rocked by a significant downturn, with Bitcoin (BTC) experiencing an 11.25% drop over the past three days. The leading digital asset has lost nearly $12,000 from its value, trading now at $94,715. As a result, the broader market has seen over $1.1 billion in liquidations, marking a difficult period for long traders. Let’s take a deeper look at the reasons behind the downturn in the crypto market today.

El Salvador’s $1.4 Billion Loan Deal

El Salvador, the first country in the world to adopt Bitcoin as legal tender, has faced increasing scrutiny from international financial institutions. Recently, the International Monetary Fund (IMF) warned El Salvador to limit its exposure to Bitcoin, a policy that has drawn significant opposition from traditional institutions. Despite these warnings, the nation stood firm on its stance.

However, a new development has emerged: El Salvador is in talks with the IMF for a loan of $1.4 billion to support its struggling economy. This loan still requires approval, but there’s a catch—the nation must revise its Bitcoin policy. Experts believe this conditional loan deal could be a key factor in Bitcoin’s recent price drop, triggering uncertainty in the crypto market.

Bitcoin Market Analysis

Bitcoin reached a new all-time high (ATH) of $108,364 on December 17, but since then, it has been on a steady decline, dropping by 12.74% from its ATH. According to CoinMarketCap, the current price of Bitcoin sits at $94,715, and it is hovering near a crucial support level. Technical analysis shows that while the market is uncertain, it is still unclear whether Bitcoin will manage to hold this support.

Looking at the 4-hour chart, the Relative Strength Index (RSI) has dipped below 30, signaling that an upward price movement could be on the horizon. This could present an opportunity for whales to accumulate Bitcoin at a discounted price.

Interestingly, the daily chart reveals a divergence between Bitcoin’s price movement and the RSI. As Bitcoin surged from $89,000 to its ATH, the RSI kept dropping, signaling that the uptrend was losing momentum. This divergence between price and RSI was a warning sign that a correction was likely. With Bitcoin’s price now on the decline, it is expected that the price and RSI will soon realign and potentially bounce back.

The Market Impact

Bitcoin’s price movements significantly impact the entire crypto market. As BTC falls, it drags altcoins down with it. The recent crash led to a 9.31% loss in the market cap of the entire crypto space, now at $3.21 trillion. Despite this, trading activity has spiked by 13.77%, largely driven by short traders.

Over the past 24 hours, around 334,000 traders were liquidated, losing a total of $1.10 billion. The largest liquidation occurred in the ETH/USDT pair, amounting to $15.8 million. Long traders bore the brunt of the crash, with $929.16 million lost due to the market’s downward spiral.

What’s Next for the Crypto Market?

The crypto market remains highly volatile and unpredictable. Many traders are hoping that Bitcoin will stabilize and recover, with the possibility of whales stepping in to accumulate assets during the dip. The current price zone represents a crucial support level, and if Bitcoin’s price drops further, the next support could be around $91,900, where the 20-day moving average lies.

Given the current market conditions, traders are advised to stay vigilant and protect their funds. The market is unpredictable, and not every moment is ideal for trading. As always, caution is key during times of heightened volatility.

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