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A crypto crash is happening today, May 14, with Bitcoin and top altcoins being in the red. CMC data shows that Bitcoin slipped below $80,000.
At the same time, the valuation of all coins fell by 2% in the last 24 hours to $2.65 trillion. This report lists the top four reasons behind the crypto market crash.
Crypto Crash Boosted by Soaring US Bond Yields
The ongoing crypto crash accelerated as US bond yields surged. The 30-year Treasury yield jumped to 5% for the first time in more than a decade. Similarly, short-term yields continued the uptrend.
This performance is happening after the US released a red-hot inflation report amid the ongoing Iran war. The Consumer Price Index (CPI) soared to 3.8% from the year-to-date low of 2.4%. Most worryingly, the closely-watched producer price index jumped to 6% in April.
This surge is mostly because of the ongoing Iran war that has driven energy prices higher. For example, the West Texas Intermediate (WTI) have remained above $100 this week. This happened after Trump warned that the ceasefire was on life support.
Bitcoin and the crypto market normally drop when bond yields are rising. It means that the Federal Reserve may not embrace an easy-money policy. Indeed, Polymarket data shows that odds are that the Federal Reserve will not cut interest rates this year.
Bitcoin and Ethereum ETF Outflows are Rising
The crypto crash has accelerated as ETF data shows that investors are no longer in an accumulation mode. Data shows that spot BTC ETFs shed over $635 million in assets on Wednesday. It was higher than $233 million a day earlier. They have now lost over $842 million in assets this year.
Spot Ethereum ETFs have also shed substantial assets this week. They lost over $183 million in assets this week after adding over $70 million a week earlier.
These numbers mean that crypto demand among institutional investors is falling this month. This is a sharp reversal after they added substantial assets before that.
The ongoing ETF outflows has also coincided with the falling demand. CMC data shows that the volume in the crypto market dropped to $94 billion in the last 24 hours.
Rotation From Crypto to Stocks
One possible reason behind the crypto crash is that investors are possibly rotating from these assets to the booming stock market. The S&P 500 and Nasdaq 100 indices have all jumped to a record high this year.
At the same time, investors have continued to buy their ETFs. For example, ETFs tracking the S&P 500 Index like VOO and SPYM have added over $70 billion in inflows this year.
Additionally, the recently launched DRAM ETF has gained over $5 billion in assets within a month. This ETF tracks some of the biggest companies in the memory chip industry, like Samsung, Sandisk, and Micron.
These companies are some of the best gainers in the market this year. It is common for investors to dump underperforming assets and buy the better-performing ones.
Bitcoin Price Action Points to Exhaustion
Technicals also explain the ongoing crypto market crash. The daily chart above reveals that Bitcoin price failed to break the $82k barrier during its recent rally. That is a sign that investors are a bit afraid to place bids above that level.
Most notably, the Average Directional Index (ADX) has dropped to 30 from this week’s high of 32. A falling ADX indicator is a sign that the bullish trend is losing momentum.
At the same time, the chart shows that the coin has formed a rising wedge pattern. Also, the two lines are nearing their confluence. That is a sign that the coin will suffer a harsh reversal soon. It’s a move that may trigger a broader crypto market crash.
