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A crypto crash is happening today, reversing some of the gains made earlier this week. Bitcoin dropped to $83,000, down by over $5,000 from its highest point this week. Most altcoins, including Arbitrum, Uniswap, and Pepe continued falling. This article looks at the top reasons why Bitcoin and top altcoins are in a freefall.
Crypto Crash Happening as Bond Yields Plunge
The ongoing crypto crash is happening because of the ongoing jitters in the bond market, where yields have continued soaring this month. The ten-year yield rose to 5.1210%, its highest level since 2004.
Similarly, in Japan, the ten-year rose to 3.08%, a week after the Bank of Japan (BoJ) hiked interest rates. In Australia, the yield jumped to 5.36%, while in Europe, yields in top countries like Germany and France jumped to their highest level in years.
Global bond yields are rising as public spending gains steam, with the US public debt surging to a record high of over $40.2 trillion. If this trend continues, and chances are that it will, the debt will jump to $50 trillion in the next few years.
In most cases, Bitcoin and other altcoins tend to underperform the market when bond yields are in an uptrend. The same also explains why gold and other assets like stocks have continued falling this week.
Soaring Crude Oil Prices and Inflation Risks
The crypto market crash is happening as crude oil prices continue falling. Data shows that Brent rose to $105 for the first time this week. The West Texas Intermediate (WTI) jumped to $93, leading to higher gasoline and diesel prices.
Soaring oil prices mean that inflation will continue rising in the coming days. As a result, there is a risk that that the headline and core consumer inflation will remain above the 2% in the foreseeable future.
As a result, the Federal Reserve will need to hike interest rates again this year after delivering its first increase last week. In a statement today, John Williams, the head of the New York Fed, noted that the bank may need to raise interest rates again before the end of the year. The prediction markets are predicting that another hike will happen either in October or December.
Bitcoin and other risky assets tends to underperform the market whenever the Fed is hiking interest rates.
Profit Taking Amid Investors
The crypto market crash is also happening because of profit-taking among investors as many of them became highly overbought. While most altcoins have dropped today, a closer look shows that most of the top laggards were some of the biggest gainers.
Pons plunged by 13.3%, while top tokens like Celestia, Arbitrum, Worldcoin, Venice Token, and Zcash were among the top laggards. All these tokens were highly overbought earlier this week.
Technicals Explain the Crypto Sell-Off and What to Expect
Meanwhile, technicals also explain why the crypto sell-off is happening and what to expect. The daily chart shows that Bitcoin jumped above the key resistance at $82,135, its highest level in May and the upper side of the cup-and-handle pattern.
Therefore, there is a likelihood that Bitcoin is attempting to retest the support at $82,135. Such a move would be a break-and-retest pattern, which is a common continuation sign. Therefore, there is a likelihood that the coin will rebound, and potentially reach $90,000. If this happens, other altcoins will likely bounce back as investors bounce back.
