CandleFocus

What caused yesterday's crypto crash?

Author: Content Editor
Yesterday, there was a small crypto crash that caught many by surprise. However, there were already some signals indicating a bullish outcome. To understand the causes, it is important to analyze the overall trend of the crypto market by looking at the price of Bitcoin and the altcoin season index. Bitcoin's price had never gone above $75,000 until October 2024. With the USA presidential elections and Trump's victory, Bitcoin surpassed $75,000 and even reached $90,000. In late November, altcoins also saw some growth, but it was short-lived. In December, as Bitcoin reached new all-time highs above $108,000, the altseason index remained stagnant. The turning point came on December 18 when the Fed's interest rate cut strategy rescheduling had a negative impact on the market. This led to the first crash, bringing Bitcoin's price below $93,000. Altcoins have been following Bitcoin's trend since late November. Although there were fears of a mini-bubble burst, Bitcoin's price returned above $100,000 on January 6. However, yesterday's crash erased all recent gains, bringing the price of BTC below $96,000. The primary cause of this crash is the possible burst of a mini-bubble. Another factor that affected the market was the drainage of capital from risk-on assets to government bonds. The USA's high Dollar Index suggests expectations of a price drop, and the rush to grab dollars indicates a market waiting for a more convenient opportunity to buy. The crypto market is currently dominated by Bitcoin, and the overall macro scenario is not favorable for risk-on assets. While a drop in prices is expected, it is followed by a rebound rather than a long-term collapse. The success of USA bonds suggests a medium-to-short-term scenario rather than a worse one.

Related News