Cryptocurrency Market Plunges Again, How Far Will the Aftermath of the Binance Hack Continue?

▲ Binance, Hacking, Changpeng Zhao/AI Generated Image ©

The cryptocurrency market has fallen into another downturn as investor sentiment has frozen due to a series of major hacking incidents. Following a $6.3 billion hack at Binance, suspicions of an additional $106 million asset theft have emerged, leading to a surge in forced liquidations. Compounded by macroeconomic uncertainties, selling pressure across the market is increasing.

According to CoinMarketCap, a cryptocurrency market tracking site, on November 2 (local time), the global cryptocurrency market capitalization decreased by 1.3% over the past 24 hours, reaching $2.58 trillion. The main causes of the market decline were identified as deteriorating investor sentiment due to major exchange hacks and the liquidation of leveraged positions. With a 79% correlation between the cryptocurrency market and the US S&P 500 index, macroeconomic pressures from traditional financial markets were also analyzed to have influenced the downturn.

Anxiety over security incidents is spreading across the market. Days after a record-breaking $6.3 billion hack at Binance, on-chain analyst ZachXBT raised suspicions of approximately $106 million being stolen from the exchange accounts of an institution located in the European Union (EU). As investor caution increased due to successive security incidents, Bitcoin (BTC)'s 24-hour liquidation volume surged by over 195% to $47.23 million. The market is paying close attention to major exchanges' security enhancement measures and announcements regarding the recovery of stolen funds.

Macroeconomic pressures and excessive leverage also amplified the decline. International oil prices plummeted by 7.3% due to expectations of diplomatic negotiations with Iran, weakening demand for inflation-hedging instruments and putting selling pressure on risk assets across the board. Particularly, as the total Open Interest surged by 43.49% just before the market decline, deteriorating investor sentiment triggered large-scale liquidations of leveraged positions, amplifying price corrections.

In the short term, the global cryptocurrency market capitalization of $2.58 trillion is considered a key support level. If this level is maintained without further major security incidents, the market may stabilize, but if the support breaks, there is a risk of a further decline to $2.48 trillion, where the 200-day Simple Moving Average (SMA) is located. Additionally, the results of the US midterm elections on November 3 have been identified as a variable that could increase market volatility.

CoinMarketCap analyzed that this decline is a result of a combination of successive security incidents in the cryptocurrency industry and macroeconomic uncertainties. While long-term market fundamentals, such as improved regulatory clarity, are maintained, short-term investor sentiment remains vulnerable. The market's direction is assessed to depend on whether additional security incidents occur and whether the $2.58 trillion market capitalization support level holds.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*