The total crypto market cap has crashed to $2.91 trillion, its five-month low, alongside Bitcoin crashing to $83,000. Although the charts look disappointing at first sight, there is a silver lining behind all this chaos.
The crypto market is currently in dire straits. Be it the sentiment of the market or the prices, everything is looking so gloomy. Fear has strangled the market, as traders are backing away from the digital assets, following $950 million liquidation in the past 24 hours.
With Bitcoin plunging to $85,000, roughly $836 million in long positions were liquidated, compared to just $118 million in short losses. This underscores how lopsided the leverage was on the way down.
In addition to that, the total crypto market cap, which was hovering close to the $4 trillion level during the latter end of October, has plunged to $2.91 trillion. This level was seen five months ago, in June 2025. So, what is the reason?
Bearish divergence, the culprit
Technically speaking, the total market capitalization crash was meant to happen, as the Relative Strength Index (RSI) showed a bearish divergence. As shown in the chart below, the RSI was making lower highs while the total market cap was making higher highs.
When this happens, typically, although there is an uptrend, the total market cap, in this case, is not sustainable. Hence, a crash happened.
But a fall is not always a downtrend or a bear market, isn’t it? On the bright side, the total market cap is still hanging just around the rising trendline. The crash was just another higher low. So the overall market uptrend is still intact, and the bear market is not in.
Beyond charts
There is much more happening than what could be plotted on charts, ‘Liquidity transmission’. Well, it is about to kick in. It means that the liquidity provided by the Fed during the past couple of cuts will now be converted into real economic value in terms of flourishing businesses. This means businesses will have more production, a larger workforce, etc.
According to Dan Gambardello, although the liquidity transmission could happen quickly, it will take time to show up on business cycles, which is measured with the Purchasing Manager’s Index (PMI), a parameter used to measure the health of the economy.
So the correlation between the PMI and the crypto market is that when the PMI rises, the crypto market follows. And he spotted that the signs that precede a PMI inflection are already lining up.
With the PMI just about to turn upwards, things are going to get better. He further stated that people are getting distracted by the Fed meetings when they should be focusing on these macro trends.
