What Crashed the Crypto Market on November 4 and Should You Worry?

Market Overview Before the Crash

The broader economic perspective showed few signs to worry, and it certainly couldn't predict what transpired in the cryptocurrency markets at the start of the current business week. Bitcoin traded at $111,000 on Sunday evening, ETH was above $3,900, XRP was at $2.60, and so on.

The Sudden Market-Wide Crash

What followed was a market-wide crash that pushed BTC down to just under $99,000 for the first time in almost five months. ETH turned negative Year-to-Date, dropping to $3,200. These declines took place less than a week after the US Federal Reserve cut interest rates, the US and China made significant progress on the trade deal front, and inflation numbers in the States were not as high as many feared.

The market cap went down to $3.2 trillion, thus erasing $1 trillion since the October 6 all-time highs.

Analysis of the Crypto Crash

According to analysis from The Kobeissi Letter, the primary reason for the crash was "more technical than fundamental." Key industry metrics such as adoption levels, deregulation, and advancing technology remained very high, which should have encouraged market entry rather than driving investors away.

However, the analysts warned that leverage is at "unprecedented levels, which is amplifying moves in the market, such as the $20 billion liquidation seen on October 10."

As a result, when uncertainty arises or technical momentum fades, downward swings are amplified. 300,000 traders are being liquidated PER DAY on average, and the market has evolved into its most reactive form in history amid Trump posts and headlines.

Consequently, the analysts warned that the short-term price picture points to "larger swings in both directions" due to the excessive leverage used by futures traders. Nevertheless, they noted that the long-term thesis is "stronger than ever."

Broader Market Movements

The crypto crash was not an isolated event, as most financial markets also experienced declines on Monday and Tuesday. While their losses, such as the 4.5% decline of the Japanese stock market, were not as damaging as crypto's, this was primarily due to the aforementioned leverage and the overall size of the crypto market.

The Kobeissi Letter reiterated that nothing had fundamentally changed and added that such corrections are periodically experienced during bull runs. The analyst concluded that "rate cuts have arrived, deregulation is here, earnings growth is running at 10%+ YoY, and the AI Revolution is accelerating," and advised investors to "ignore the noise."