A crypto market crash is happening today, January 25, with Bitcoin and most altcoins in the deep red. Bitcoin plunged below $88,000, while Ethereum fell to $2,800.
The market capitalization of all tokens fell below the key $3 trillion support level, while the CoinMarketCap 20 index fell more than 2.2% in the last 24 hours and 10% in the last seven days. This article explores the main reasons for the current crypto crash.
Crypto Market Crash Happens as Bitcoin Forms Bearish Pattern
One of the main reasons why the crypto market is collapsing is that the price of Bitcoin formed a series of bearish chart patterns on the daily and weekly time frames. For example, the daily time chart shows that the coin has remained below the Supertrend indicator and the 50-day exponential moving average (EMA).
Bitcoin price also formed a risky bearish flag pattern, consisting of a vertical line and an ascending channel. It is now attempting to break below the flag’s lower boundary, which portends further decline, potentially to the November low at $80,400. A decline below this level would signal further decline, potentially to the April low at $74,000.
Bitcoin is the most important coin in the crypto industry and its actions tend to affect the broader market. A pullback in Bitcoin often leads to further declines for the broader crypto market, while a rebound triggers a crypto rally.
The fear and greed index has been moved to the fear zone
Another reason why the crypto market is crashing is because the Crypto Fear and Greed Index continues to decline. Data compiled by CoinMarketCap shows the index fell into the fear zone at 34, down from its yearly high of 59.
The index fell amid major market risks. For example, there is a risk that the Federal Reserve will maintain a hawkish stance this year following strong macroeconomic data from the United States.
Data released last week showed the economy continued to grow in the third quarter and analysts estimate it grew 5% in the fourth quarter. Other data showed the job market improved, while inflation stabilized.
The other risk is that the United States threatens to launch a trade war against Canada, its largest trading partner. Trump has warned he would impose 100% tariffs on all goods coming from the country, while Canada has hinted it will retaliate.
At the same time, there is a risk of a government shutdown next week due to ongoing protests in Minnesota. Democrats have demanded reforms to the Department of Homeland Security (DHS) before passing a bill to fund it.
The Bitcoin and crypto market has fallen as investors turn to other, better-performing assets. For example, data shows that Bitcoin spot ETFs have lost over $1 billion in assets this year, while gold and silver ETFs have added billions of dollars in assets.
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