Three Factors Triggering Fall in the Crypto Markets: Short Selling, ETFs, and US Fed

Key Insights:

• Three factors are leading this current sell-off in the markets: shorts in the crypto markets, whale dumping, and ETF redemptions.

• The lack of buying momentum as well as liquidity to counter these sell-offs has resulted in a sharp decline in crypto prices.

• Next support levels for Bitcoin is $74k, Ethereum is $2000, XRP is $1.5, and Solana is $125.

• The markets are yet to show any conclusive signs of a bottom, making dollar-cost averaging a risky affair in the current markets.

Markets React Sharply to Bearish Factors

Crypto markets saw yet another correction after yesterday's route as the market leader Bitcoin fell another 8% intraday to $78.2k. This fall triggered a widespread correction in the markets, even correcting those cryptocurrencies like Litecoin that had managed to stay untouched by the last fall yesterday.

The next support levels for top cryptocurrencies are:

• Bitcoin: $74k

• Ethereum: $2000

• XRP: $1.52

• Solana: $125

• Dogecoin: $0.15

• Tron: $0.17

Further, at this level of volatility, we would suggest keeping away from memecoins, as many of them have been witnessing severe price corrections.

In the first leg of the crash yesterday, the crypto markets saw sentiments drop to extreme fear levels. This sharp 17% drop in Bitcoin caused a simultaneous drop in the fear and greed index from 55 last week to 10 yesterday. Today, the markets are at a slightly higher level of 21.

Analyzing the Factors That Crashed Crypto Markets

At present, there seem to be at least three factors that are causing the current markets to slide: ETF redemptions, short selling, and a liquidity crisis.

The Bitcoin ETFs have been seeing high redemptions since the first week of February 2025. A report recently claimed that only 44% of the investments in the crypto ETFs are long-term, while others are speculative.

Short sellers also emerge as a major factor in this space, with most of the sellers shorting Bitcoin at higher levels. The sellers are using call options to sell Bitcoin at higher strikes such as $100k, $90k, and $80k. This is explained in detail in the next section below.

The third and the most impactful factor is the liquidity crisis in the US Dollar. The Federal Reserve has hinted in its last two meetings that due to inflation in the US economy, there could be lesser to no rate cuts in the market. This sparked a sell-off based on the expectation of lower prices in near future.

Corrections Could Get More Severe This Weekend

At present, nothing much is known about the exact reason, which makes the near future uncertain. In our collective experience at VOC, we expect another fall to take place somewhere around this weekend. The reason for this expectation is that the hard support levels for multiple large-cap cryptocurrencies are still 5% to 10% away from current levels.

Take the example of Bitcoin, which has its next support level at $74k. At press time, Bitcoin traded at $80k.

The only reason that could prevent a further crash at these levels is the exhaustion of sellers in the crypto markets. This exhaustion typically can be visualized at the standing puts and calls in Bitcoin's strike prices.

The lower the put/call ratio in the markets, the lower the propensity of the sellers to offload their crypto. Mostly, those who have sold puts try to cover their positions by selling crypto in the open market, which triggers a slide in the spot prices.

In the current markets, the graph below shows Puts (red candles) and Calls (green candles). We clearly see that the red candles are less than the green ones, which shows that there are more sellers (selling or shorting is done via call options) than buyers in the markets.

Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.