Crypto Market's Wild Ride: $300B Wiped in 24 Hours, Bitcoin and Ethereum Plummet

The crypto market has witnessed an unprecedented surge in volatility, with established coins like Bitcoin and Ethereum experiencing extreme price swings. Since January, the frequency of flash crashes has risen sharply, erasing billions from the market. A crypto analyst has provided insights into the factors driving these flash crashes and the market's recent behavior.

A crypto analyst known as 'The Kobeissi Letter' has shed light on the recent market crash and the drastic falls of top coins. The analyst revealed that the increasing number of flash crashes has resulted in over $300 billion being removed from the market in just 24 hours. On February 2, the market began selling off, with Bitcoin dropping below the $95,000 mark. Between 1:45 AM ET and 2:15 AM ET, the cryptocurrency had one of the most shocking crashes, falling by $5,000 in mere minutes. Ethereum, the second-largest cryptocurrency after Bitcoin, had it even worse, experiencing massive liquidations that contributed to a 37% price crash, fueled by trade war headlines.

The key factor behind these dramatic flash crashes is the growing divide between institutional and retail investors. Wall Street hedge funds have increased their short positions on Ethereum by 500% since November 2024, marking a historic level of institutional bearishness toward Ethereum. Short positioning in Ethereum has also increased by over 40% in just one week. Meanwhile, institutions have continued to accumulate Bitcoin, while retail investors have poured capital into smaller altcoins like Solana, creating extreme volatility in these assets. This "polarization" has led to the formation of "air pockets" in liquidity, triggering cascading liquidations and amplifying market instability and price crashes.

The analyst has also pinpointed that this polarization phenomenon works in the opposite direction, as the market can experience rapid recovery, leading to billions added to its market cap within hours. The Fear and Greed Index has fallen from a bullish stance just weeks ago to 29% extreme Fear, underscoring the speed at which the market's sentiment is changing to the negative. Political and corporate influences have also been dictating the crypto market, with Eric Trump publicly supporting the purchase of Bitcoin and Ethereum during dips, aligning with market rebounds. While the market experiences flash crashes and instability, MicroStrategy continues to accumulate Bitcoin, contributing to the polarization of the cryptocurrency