#CryptoMarketDip Causes of the Crypto Market Crash (Phased Explanation)
1. Burst of a Mini-Bubble
The primary cause of the recent crypto crash seems to be the possible burst of a mini-bubble. Unlike major speculative bubbles, mini-bubbles last briefly and have little impact on the medium to long-term market trend. Many analysts argue that the November-December period did not constitute a true mini-bubble.
2. Capital Shift to U.S. Bonds
A key factor influencing the crash was the significant drainage of capital toward U.S. government bonds. This shift caused a flight from risk-on assets like cryptocurrencies to safer options. The trend was foreshadowed by a rise in the MOVE Index (U.S. Bond Market Option Volatility Estimate), indicating higher volatility in the bond market.
3. High Dollar Index (DXY)
Another crucial factor affecting the crypto market was the strength of the U.S. Dollar Index (DXY). The DXY remained high and showed signs of further increase, contributing to downward pressure on risk assets like Bitcoin and altcoins.
These combined factors — capital outflows to bonds and a strong dollar — created an unfavorable environment for crypto, leading to the market crash.
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