The crypto market crash gained steam overnight as investors embraced a risk-off sentiment. Bitcoin price dropped to nearly $100,000, while the market cap of all coins plunged to over $3.2 trillion. This article explains the main reasons why the crypto market crash is happening and whether the bull run is over.
Why the crypto market crash is happening
There are at least three main reasons why cryptocurrencies are in a strong bear market, including: Bitcoin pullback, geopolitics, seasonality, and Trump and Elon Musk fallout.
Bitcoin price pullback
The first main reason why the crypto market is plunging is that Bitcoin price has pulled back from the year-to-date high of $111,900 to $101,000. This retreat happened as investors booked profits following the strong rally.
Bitcoin is the most important cryptocurrency in the industry, and its price movement often affects other coins. When Bitcoin sneezes, the other altcoins catch a cold, and when it rises, the others thrive.
Bitcoin always pulls back after hitting its all-time high. For example, it jumped to an all-time high of $64,950 in 2021 and then retreated to $24,490 in the next few months.
It jumped to a new all-time high of $73,635 in March 2024 and then plunged to $74,000 in August. History shows that it always bounces back after this happens.
Technically, Bitcoin price has dropped as it forms the handle section of the cup-and-handle pattern. This pattern comprises a horizontal support, a rounded bottom, and a handle.
Geopolitics
The crypto market crash is happening because of geopolitics, which have fueled volatility. Donald Trump signed a new executive order hiking steel and aluminum tariffs to 50%. He hopes that these tariffs will help to boost domestic steel production.
Trump has also complained about China and lamented that the country was not fulfilling its part of the agreement reached in Switzerland. He has noted that China was still not shipping rare earth metals.
China has then accused the US of violating the agreement. Trump has threatened to deport some Chinese students in American universities and to block shipments of key semiconductors.
Xi Jinping and Trump talked on the phone on Thursday, but failed to resolve these lingering issues. Instead, they agreed to keep talking to resolve outstanding issues.
Therefore, the crypto market crash is happening as investors anticipate more trade issues in the coming months.
Seasonality is contributing to crypto crash
Further, the crypto market crash is accelerating because of seasonality, since June is often the worst month for the industry. This happens because of the summer season when most large investors travel.
Bitcoin dropped by 7% last June after gaining by 12% a year earlier. Before that, it dropped by 37% in June 2022, 6% in 2021, and 3.18% in 2020.
Similarly, Ethereum fell by 8.6% in June last year after rising by 3.2% the previous year. It had dropped by 45%, 15%, and 2.4% in the previous three years.
Trump and Elon Musk’s fallout
The crypto market crash also happened because of the Elon Musk and Trump fallout, because of the Big, Beautiful Bill. Musk has asked politicians in Washington to vote against the bill because it ends EV subsidies and increases the debt.
He has even criticized Trump for his tariffs, which he believes will lead to a recession. Most importantly, he has supported the impeachment of Trump.
This is probably the most expensive feud ever, as Musk’s net worth plunged by $33 billion on Thursday as Tesla stock fell. These actions have an impact on the crypto market because Trump and Musk are top advocates for the industry.
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