Why is the crypto market down today?

The entire crypto market dipped on Oct. 1 as rising geopolitical tensions in the Middle East, increasing long liquidations and a sell-off in US equities appeared to cool investor enthusiasm for “Uptober.”

Over the last 24 hours, the total crypto market capitalization dropped by over 1.3% to about $2.22 trillion, and stocks pulled back.

Let’s look at the factors driving the crypto market down today.

Crypto prices slip over escalating situation in the Middle East

The instability witnessed in equities and digital assets on Oct. 1 follows reports of a possible escalation in the Middle East between Iran, Lebanon and Israel.

The United States has indications that Iran is preparing to imminently launch a ballistic missile attack against Israel, according to Disclose.tv. 

Israeli Prime Minister Benjamin Netanyahu stated that the actions taken so far “will not be enough,” as reported by CNBC. As oil prices continue to spike, they would likely push inflation higher, limiting the US Federal Reserve’s ability to continue cutting interest rates.

One hour after Wall Street opened on Oct. 1, the S&P 500 was down 1.1%, while the Dow Jones index dropped 302 points, or 0.7% The Nasdaq Composite index pulled back 1.4%. 

Similarly, crypto prices displayed high volatility, with Bitcoin (BTC) dropping 2.6% over the last 24 hours to trade at $61,503 before recovering to $62,557 at the time of publication. Ether (ETH) which initially dropped by 12.6% to $2,534, is now trading 0.5% higher at $2,569.

Related: 3 signs that Bitcoin’s Q3 close was bullish

Over $340 million in liquidations catch crypto traders offside

Data from CoinGlass reveals that long traders—those betting on the crypto market’s upside—have witnessed a total of $291.3 million worth of liquidations in the last 24 hours. In comparison, short traders suffered over $55.6 million in liquidations in the same period.

Bitcoin liquidations reached $53 million over the last 4 hours, with over $71.8 million worth of cumulative leveraged positions liquidated on the day, according to CoinGlass data. The total liquidations across the wider crypto market stand at $346.8 million over the last 24 hours, with the tally increasing at the time of publication.

When long positions are liquidated, traders who are betting on prices going up are forced to sell their positions, often at a loss. This increased selling pressure has driven the crypto market valuation lower today.

Meanwhile, the open interest reduction signals a decrease in active futures contracts, indicating that traders are closing their positions and stepping back from the market.

Nonetheless, funding rates of most top coins, including Bitcoin and Ether are positive, indicating that traders still in the market are generally more bullish, as they are willing to pay more to maintain long positions.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.