The global crypto market has experienced a sharp 8% decline over the past week, causing panic among investors. The total market cap now stands at $3.24 trillion, with key cryptos like Bitcoin, Ethereum, and Cardano all suffering significant drops. Bitcoin's price fell below the key support of $100,000, Ethereum crashed below $4,000, and Cardano tumbled below $1, sparking further concern.
While the broader market downturn is concerning, it's not without explanation. Several key factors have driven this decline, with the most significant being profit-taking, Federal Reserve policy changes, and Jerome Powell's recent comments on Bitcoin. Profit-taking has been a major contributor to the decline, as investors look to lock in their profits after massive rallies. Bitcoin, Ethereum, Cardano, and other major altcoins experienced massive gains of over 50% in the past three months, with Bitcoin even crossing the $100K mark. However, as prices rise, investors look to cash out at higher prices, putting selling pressure on the market.
The Federal Reserve's policy changes have also played a significant role in the decline. The Fed signaled that it would slow down interest rate cuts in 2024, contradicting earlier expectations of a more aggressive rate-cutting strategy. This shift in policy hit the stock market and the crypto market simultaneously, as investors view crypto as a high-risk, speculative asset. The shift in sentiment is largely driven by fears of tighter liquidity, as higher interest rates make it more expensive for investors to borrow and deploy funds into speculative assets like crypto.
Jerome Powell's recent comments on Bitcoin were also a significant blow to the market. In a recent press conference, Powell stated that the Federal Reserve is not allowed to hold Bitcoin and has no intention of changing that policy. This statement shattered hopes that the U.S. might one day hold Bitcoin as part of its national reserves. Bitcoin reacted swiftly, dropping from around $102,000 to below $95,000, taking the rest of the market with it.
Analysts suggest that unless Bitcoin can reclaim the $100K support level, we may see further declines. If Bitcoin breaks below its next key support at $94,000, a move toward $90,000 could be possible. However, long-term investors remain optimistic, pointing out that profit-taking and Fed policy changes are temporary. They argue that Bitcoin's halving event in 2025 could bring renewed interest and spark a new bull run. For now, all eyes are on the Federal Reserve's next move, as any indication of rate cuts or dovish policy changes could fuel a rebound in the crypto market.
Source: https://cryptoticker.io/en/top-3-reasons-why-cryptos-are-crashing-today/
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