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.