Why are Bitcoin, Ethereum and XRP crashing as crypto liquidity dries up? - Crypto News

Major cryptocurrencies suffered heavy losses on Friday, November 13, with Bitcoin trading near $68,388, down 7% over 24 hours, and Ethereum falling 6.2% to $1,922.

The broader market decline was led by Solana, which dropped 5.9% to $78.30, while BNB lost 6.8% to $631 and XRP declined 4% to approximately $1.

This selloff coincided with renewed geopolitical uncertainty after Iran’s Revolutionary Guard Corps claimed it had attacked a US early-warning radar installation in Bahrain.

The reported strike followed an alleged attack on a telecommunications tower in southern Iran, though US and Bahraini authorities had not immediately confirmed the claims.

Liquidity crunch

A separate but critical factor driving the decline is a sustained contraction in cryptocurrency liquidity. Blockchain analytics firm Glassnode reported that stablecoin supply had fallen $14.2 billion over 30 days through November 9.

This decline, the largest since June 2022, has reduced the amount of dollar-linked funds available within the cryptocurrency market. Stablecoins such as USDT and USDC allow traders to hold dollar-linked assets before buying cryptocurrencies.

When investors redeem stablecoins for dollars, the supply in circulation falls, leaving less fuel for a market rally.

Institutional outflows

Institutional demand has also weakened significantly, as evidenced by substantial withdrawals from US spot Bitcoin and Ethereum ETFs. Glassnode reported that US spot Bitcoin ETFs lost approximately $1.6 billion across 20 trading sessions.

More recent data from Farside Investors showed $299.8 million in Bitcoin ETF withdrawals on November 11, including $269.7 million from BlackRock’s IBIT. Ethereum funds recorded similar selling, with US spot Ether ETFs losing $144.8 million during the same session.

The withdrawals show investors reducing exposure through regulated funds while Bitcoin and Ethereum continue trading below important price levels.

Selling pressure has extended to the derivatives market, with CoinGlass data showing $1.23 billion in crypto liquidations over a rolling 24-hour period. Bitcoin accounted for roughly $677.5 million, while Ethereum recorded another $249.8 million.

Broader market impact

The market decline has affected a wide range of cryptocurrencies, with privacy-focused tokens among the worst performers. Monero fell 11.1% to $510.71, while Zcash dropped 9.1% to $892.51.

Dogecoin lost 6% to $0.06323, and Chainlink declined 4.2% to $9.67. Other major assets, including Avalanche, Uniswap, Aave, Hedera and NEAR, recorded declines of approximately 6% or more.

Despite the selling, Glassnode’s November 11 research identified substantial Bitcoin buy orders between $68,000 and $72,500 on major exchanges.

The firm reported that buy orders had outnumbered sell orders within 5% of Bitcoin’s trading price since November 5, although exchange orders can be withdrawn before execution.