Why is crypto down today? The market confuses euphoria for a reset

Over the past 48 hours, more than $700 billion has been wiped out from the crypto market, causing major high-cap assets to return to critical levels. Whether they will rebound from these levels or continue their decline remains to be seen.

Bitcoin ETF flows may offer a clue. Santiment data shows $2.77 billion in net inflows between the 17th and the 27th of September, marking seven straight positive U.S. trading sessions.

The setup also mirrors August, when nine days of consecutive inflows brought in around $3.04 billion worth of BTC.

However, Santiment warns that demand may now be entering euphoric territory. If these inflows begin to slow, the buying momentum behind BTC could quickly lose steam.

Interestingly, that could very well be the case. 

According to SoSoValue, Bitcoin ETFs have seen over $23 million in outflows. While this remains small compared with the $2 billion weekly inflow, it breaks a seven-day streak of positive flows.

If the demand for ETFs cools, it could help explain why crypto is down as the momentum in the broader market loses steam.

The long squeeze adds another layer to the move. More than $400 million in long positions have been liquidated in the last 24 hours.

However, combined with a fall in ETF flows, data suggests that deleveraging alone might not be fueling the sell-offs. Instead, fading FOMO could be adding to the downside pressure too.