The crypto market suffered a big reversal on Friday, continuing the recent volatility. Bitcoin plunged below $104,000, while Ethereum moved below the resistance point at $2,400. The total market capitalization of all cryptocurrencies tumbled to $3.2 trillion.
The crypto crash affected all tokens, including SPX6900 (SPX), Pepe (PEPE), and Polkadot (DOT), which fell by over 5%. They have all moved into a bear market after losing by double digits from their highest points this month. Here are the reasons why these tokens are falling.
Triple Witching in the US Contributed to Crypto Crash
The crypto crash is occurring due to the volatility that typically accompanies the US triple-witching event.
Triple-witching is a situation where several options contracts expire at the same time in the US. In today’s case, options worth over $6.5 trillion expired. This explains why the top U.S. indices, such as the S&P 500, Dow Jones, Nasdaq 100, and Russell 2000, dropped.
Historically, Bitcoin, most altcoins, and the stock market have experienced volatility when this triple-witching event occurs.
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EU and Iran Talks Yield No Breakthrough
The crypto crash happened as geopolitical risks remained, with high-level talks between Iran and the European Union ending without a deal. Instead, the EU asked Iran to resume talks with the United States. Iranian officials said that there was no room for negotiations until Israel stopped its attacks.
Crypto traders are watching Trump’s next actions and whether he will strike Iran’s key nuclear facilities. Such a move is expected to lead to a wider conflict, which may lead to higher crude oil prices and shipping costs. As a result, this may push the Fed to avoid cutting interest rates.
Fed’s officials have mixed opinions on the next Fed actions. For example, Mary Daly suggested that the next cut will happen in the fall, saying:
“For me, I look more to the fall. By then, we’ll have quite a bit more information, and businesses are telling me that’s what they’re going to look to for some resolution.”
On the other hand, Christopher Waller said that the bank may cut rates as soon as the July meeting, which would be bullish for the crypto market. He said:
“We could do this as early as July. I think we’ve got room to bring it down, and then we can kind of see what happens with inflation. We’ve been on pause for six months to wait and see, and so far the data has been fine.”
Falling Crypto Fear and Greed Index
The crypto crash happened as the fear and greed index pulled back. CoinMarketCap data shows that the crypto fear and greed index plunged from the greed zone of 65 earlier this month to the neutral point at 48. This is a sign that the index may drop to the fear zone, which often leads to more downside in the crypto market.
On the positive side, Bitcoin and Ethereum have strong fundamentals, with their ETF demand jumping and supply on exchanges falling. This means that these coins will likely bounce back in the coming weeks.
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