The crypto market turns red: Here's what caused the collapse! (2024)

A new storm shakes the cryptocurrency market! Known for its volatility, the crypto market has once again surprised investors with a significant drop. Key assets like Bitcoin and Ethereum were particularly affected, but this is just the tip of the iceberg. What really happened, and what are the reasons behind this descent into hell?

Cryptocurrencies in Free Fall from the Early Hours of This Tuesday

The early hours of this Tuesday were particularly difficult for the cryptocurrency market, which suffered a brutal correction, causing significant losses for major digital assets. Bitcoin (BTC), the largest crypto by market capitalization, saw its price drop below the $66,000 mark, erasing gains from previous trading sessions.

Similarly, Ethereum (ETH), the second-largest crypto by market cap, plunged to $3,400, negating progress made in the previous week. Altcoins weren’t spared from this wave of selling either. Dogecoin (DOGE) and Solana (SOL) recorded drops of nearly 9% within 24 hours, illustrating the heightened volatility that characterizes this market.

The figures are equally alarming for other cryptos. TON and Binance’s BNB also felt the impact of this fall, although BNB better resisted with a limited decrease of 1.5%. At the same time, a significant reduction in Bitcoin positions held by asset managers listed in the United States was observed. In total, nine asset managers reduced their holdings by 3,169 BTC, approximately $208 million. Prestigious names like Fidelity and Grayscale were cited among the notable sellers. These two managers respectively reduced their positions by 1,224 BTC and 936 BTC.

Why Is the Crypto Market Collapsing?

Several factors have contributed to this sharp decline in the crypto market. Profit-taking by investors is one of the main causes of this drop, as they look to secure their gains after a period of rise. Additionally, net outflows from Bitcoin ETFs in the United States have increased downward pressure on the market. Another critical factor was the strengthening of the US dollar, triggered by political uncertainty following the surprise decision by French President Emmanuel Macron to call for early elections. This situation prompted traders to turn to the dollar, thereby weakening the price of Bitcoin, which traditionally has an inverse correlation with the US currency.

Recent speeches by officials of the US Federal Reserve (FED) have also weighed on the crypto market. FED Chairman Jerome Powell adopted a more stringent tone, signaling limited interest rate hikes for 2024, which dampened investor enthusiasm for risk assets like cryptos. Simultaneously, massive liquidations were observed, with $245 million in positions liquidated in 12 hours, including $225 million in long positions, increasing the selling pressure.

This price drop has various implications for the crypto market. On one hand, it reflects the market’s increased sensitivity to macroeconomic factors and institutional capital movements. On the other hand, some analysts see this correction as a buying opportunity, especially for altcoins that are testing key support levels. The current trend shows that the crypto market could continue to fluctuate based on global economic developments and monetary policies. Investors must remain cautious and monitor signals of recovery or further declines.

DISCLAIMER

The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.