A crypto crash is underway, with Bitcoin plunging below $108,000 for the first time this week. Ethereum price fell to $2,750, XRP to $2.43, while Solana moved to $160.
As a result, the market capitalization of all cryptocurrencies dropped by 1.4% to $3.4 trillion, and 24-hour liquidations moved to $313 million. Let’s explore why Bitcoin and altcoins are going down today.
Donald Trump to set unilateral tariffs
The crypto crash is happening as trade risks re-emerge. In a statement overnight, Donald Trump said that he will set unilateral tariffs ahead of the July 9 deadline when his 90-day pause ends.
Trump said that he will send letters to top trading partners giving them the final offer on tariffs. This statement came after the US and China completed their two-day negotiations in London.
The two sides reached some agreements, with China agreeing to restart rare earths and magnet shipments to the US, and the US agreeing to allow all Chinese students to study in the United States.
Still, it is unclear whether Trump will move on with his threat of higher tariffs to other countries. He is known for setting deadlines and not following through with them. For example, he recently threatened a 50% tariff on European good, only for him to extend the deadline to July. This habit has led to the phrase, Trump Always Chickens Out” or TACO.
One major risk that may push Trump to follow through on his tariffs is that the US has not had a high inflation as analysts were expecting. Data released on Wednesday showed that the headline consumer price index (CPI) rose from 2.3% in April to 2.4% in May, while the core CPI remained at 2.8%.
Therefore, the ongoing crypto crash is happening because of the rising tariff threat from the US and the potential implications.
Bitcoin and other altcoins are crashing because of profit-taking. It is always common for these assets to drop after rising modestly over time.
Why the crypto crash could be brief
There are a few reasons why the ongoing crypto market crash may be brief. First, cryptocurrencies will likely recover because Bitcoin has formed a cup-and-handle pattern on the daily chart as shown below. A C&H pattern often results into a strong bullish breakout, equal to the cup’s depth. In this case, the cup has a depth of about 30%, giving it a target of over $140,000.
Bitcoin price chart | Source: TradingView
Second, analysts are highly bullish on Bitcoin, which could trigger a comeback. In a statement on Wednesday, Paul Tudor Jones, a hedge fund manager said that Bitcoin should be in every portfolio as US debt jumps. He also expects that Trump will appoint a dovish Fed official, triggering a 10% US dollar index crash as we have predicted before.
Read more: DXY: Here’s why the US dollar index crash may continue
Third, investors continue to buy Bitcoin and Ethereum ETFs. SoSoValue data shows that Bitcoin ETFs had $164 million in inflows on Thursday, bringing the cumulative total since inception to $45.2 billion. Similarly, Ethereum had inflows of $124 million, bringing the total to $3.58 billion.
Companies are intensifying their Bitcoin treasury strategy. For example, GameStop is raising another $1.75 billion to buy Bitcoin. H100 Group, a Swedish company, is raising $10 million to buy BTC. Other companies like Trump Media and Meta Planet are accumulating.
The ongoing Bitcoin accumulation is happening at a time when balances on exchanges have fallen. Santiment data shows that balances have fallen to 1.1 million, down from 3 million a few years ago and the lowest level since 2017. As such, rising demand and falling supply will likely trigger more gains.
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