The crypto market crash continued its strong downtrend on Friday, with Bitcoin tumbling to $85,000. Ethereum plunged by 7.65% in the last 24 hours to $2,800, while XRP, BNB, Solana, and Dogecoin dived by over 5%. So, why is the crypto crash happening?
Crypto market crashes intensified as stocks plunged
The ongoing crypto crash intensified as American stocks erased their initial gains and plunged after Nvidia earnings. The blue-chip Dow Jones Index dropped by 385 points, while the S&P 500 and Nasdaq 100 plunged by 100 and 486 points, respectively.
After jumping by 5% after earnings, Nvidia stock plunged by over 3%, erasing billions of dollars in value. Other top Magnificent 7 companies like Tesla, Microsoft, and Google also plunged.
The stock market crashed as investors remained concerned about the artificial intelligence (AI) bubble and technology valuations.
One major concern is that Nvidia is involved in circular investments, where it invests in companies and then those firms buys its chips. There are also concerns about the ongoing technology valuations.
Fear and Greed Index plunged
The other main reason behind the crypto market crash is that there is increased fear in the industry. Data compiled by CoinMarketCap shows that the Crypto Fear and Greed Index has plunged to the extreme fear zone of 11.
Similarly, the CNN Money Fear and Greed Index has plummeted to the extreme fear zone of 6, its lowest level since April.
Notably, all major indices, including the stock price strength, put and call options,.market momentum, market volatility, safe haven and junk bond demand have all plunged to the extreme fear zone.
Historically, stock and crypto prices plunge when there is fear in the market as this normally leads to more panic selling among investors. However, on the positive side, bull runs normally starts when there is a sense of fear in the market.
Liquidation concerns remain
The crypto market crash is also happening because of the ongoing concerns about liquidations in the market. The trigger of all this was the liquidations that happened on October 10 this year when over 20 billion worth of trades were wiped away.
Liquidations continued on Friday, with thousands of traders being wiped out. Data compiled by CoinGlass shows that the open interest jumped by 40% to over $943 million. One Bitcoin trader suffered a $31 million liquidation in the last 24 hours.
In a statement, Tom Lee, the founder of FundStrat, believes that these sell-offs after major events normally takes about 8 weeks and that we were on the sixth one. As such, Lee believes that the coin will eventually rebound.
Tom Lee(@fundstrat)’s #Bitmine bought another 17,242 $ETH ($44.46M) today, and now holds ~3,623,002 $ETH($10.4B).
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ETF outflows continued this week
The ongoing crypto market crash is also happening as investors remained concerned about the ongoing ETF outflows as some American investors started to capitulate. Data compiled by SoSoValue shows that Bitcoin ETFs shed over $550 million in outflows this week. Spot Ethereum ETFs have shed over $294 million in assets.
On the positive side, some recently launched ETFs continued to see inflows. All spot XRP ETFs have now had $410 million in inflows, while Solana ETFs have had nearly $500 million in inflows.
Will the crypto market rebound?
The ongoing crypto market crash has led to a panic among investors who have seen their investments turn negative.
Still, history shows that these crashes are often followed by rebounds. A good example of this is when Bitcoin dropped by double digits in April and then rebounded.
In an X post, Tom Lee, believes that Bitcoin will eventually rebound once the ongoing panic ends. Michael Saylor has also continued to accumulate, while Peter Brandt, the popular technical analyst, predicted that the coin will likely hit $200,000 in the near term.
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