There is a sea of red in the cryptocurrency market as data from Coinglass reveals that a total of $637.68 million worth of leveraged longs have had their positions liquidated as flagship cryptocurrency asset, Bitcoin lost over $4,000 or 8.80% yesterday, to trade as low as $42,798.

A major catalyst for this bearish movement is as a result of the United States’ ADP National Employment Report which reveals that private sector employment increased by 807,000 jobs from November to December. This is up over 100% from the 400,000-employment forecast according to Investing.com.

Backstory

The ADP National Employment Report is a measure of the monthly change in private-sector non-farm payroll which is based on the payroll data of approximately 400,000 US business clients. The data is released two days ahead of the government’s Non-Farm Payroll (NFP) data and it is used as a predictor of the government’s Labour Market Report.

A reading that is stronger than forecast is generally bullish for the dollar index, which is a measure of the strength of the United States dollar while a weaker than forecast reading is generally bearish for the U.S dollar.

The flagship crypto lost about $4K in just a few hours after notes from the Fed’s December FOMC session re-confirmed plans to reduce the balance sheet.

As the dollar strengthened and positive economic data from the U.S. shook investors’ grip on risky financial assets, bitcoin dropped to $42.5K with record-selling observed in the early hours of Thursday.

An intraday sell-off was triggered after the Federal Reserve indicated a rate hike may occur in March rather than the usual timeframe.

More than $800 million worth of trading positions were liquidated during the day, with 207,527 traders liquidated. $10 million worth of XBTUSD was liquidated on Bitmex.

As investors rush to safe-haven currencies, others are turning to alternative cryptocurrencies (altcoins) like Solana, XRP, and Polkadot, which are down more than 10%.

For now, despite the spotlight on altcoins, buying pressures have declined in both Bitcoin and Ethereum. If BTC does not break back above $45K, the market may experience an extended bear period in which it could retrace to the low $30K range.

Crypto market capitalization is $2.04 trillion, down 8.53% since yesterday. However, activity is on the surge as the total crypto market volume for the day is $122 billion, an increase of 18.25%.

At present, bitcoin dominates the market with 39.74%, up by 0.39% since yesterday. BTC’s dominance ratio – or the measure of BTC’s market capitalization in relation to all crypto – continued to decline on Wednesday, reaching 39%.  This is the lowest ratio since April 2018, when crypto markets were in a bear market

According to data from Ultrasound Money, an Ethereum network tracker, after 152 days since the implementation of the EIP-1559 proposal, which gave the Ethereum blockchain deflationary functionalities and the ability to burn gas fees, the network now burns an average of 6.18 ETH per minute, which at today’s price of $3,800 per ETH, puts the burn rate at $23,484 per minute.

So far, the Ethereum blockchain has burned a total of 1,362,500 ETH which at today’s price, puts the total burn so far at approximately $5.18 billion as of the time of this report.

The Ethereum network is transitioning from a Proof-of-Work (PoW) consensus mechanism to a Proof-of-Stake (PoS) and the network has been going through a series of hardfork updates to that effect.

A hardfork occurs when there is a major alteration to the protocol of a blockchain network that results in a divergent split between the old protocol and the newer version.

The London hard fork was one of the upgrades and it incorporates five new Ethereum Improvement Proposals (EIPs), which are all temporary until the permanent Ethereum 2.0 update.

One of the improvements is the EIP-1559 which is a proposal for the introduction of a ‘base fee’ that tracks gas fee prices across the entire Ethereum network in order to ensure accurate gas fee predictions for network users. It also gives the Ethereum network deflationary functionalities which give the network the ability to burn gas fees.

Token Burns, in cryptocurrency terms, refers to sending an otherwise usable token (or fraction thereof) to an unusable account. The act of burning effectively removes tokens from the available supply, thereby increasing its relative scarcity.

According to Ultrasound Money, since being activated 152 days ago, OpenSea, the popular Ethereum network NFT marketplace and the world’s biggest NFT marketplace, accounts for the most burns on the network which represents approximately 145,700 ETH which is equivalent to approximately $553.7 million. This accounts for 10.69% of the total burns.

Asides from OpenSea, ETH transfers account for 132,760 ETH or approximately $504.5 million and Uniswap V2 accounts for 114,560 ETH or approximately $435.3 million come in at second and third respectively.

The popular play-to-earn platform, Axie Infinity, takes the 8th spot, accounting for 16,915 ETH burned or approximately $64.3 million.

At the moment, the Ethereum blockchain is burning about 8.97 ETH per day which is $34,086 using the current market price of Ether. This means the total average is expected to increase in the future.

The London hard fork is a vital upgrade for the Ethereum network in its quest to move from a proof-of-work (PoW) network consensus to a proof-of-stake (PoS) network consensus which is aimed at saving the network from near-paralysis and reducing the amount of energy needed to execute transactions on the network as the PoS is known to consume far less energy than the PoW.