A crypto flash crash is underway, with Bitcoin and most altcoins experiencing a significant decline. Bitcoin price plunged below $110,000, while top altcoins like Dogecoin, Chainlink, Pepe, and Uniswap fell by over 10% in the last 24 hours.
Why the Crypto Flash Crash is Happening
There are at least three main reasons why the crypto market crash is happening.
First, the crypto industry is plunging as investors await the upcoming NVIDIA earnings. This explains why the stock market also declined on Monday, with the Dow Jones, Nasdaq 100, and S&P 500 plunging by over 0.50%.
NVIDIA is one of the most important companies in the world today. In addition to being the biggest firm in the world, it is also the top beneficiary of the artificial intelligence (AI) industry, which has driven the stock market in the past few years.
Therefore, strong NVIDIA earnings are likely to lead to a risk-on sentiment in the market, resulting in further gains. However, a weak earnings report will likely trigger further downside in the stock and crypto markets due to its significant influence.
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Crypto Market Crashes Because of the Federal Reserve
The crypto market is crashing because of the Federal Reserve and the upcoming economic data. While Jerome Powell pointed to an interest rate cut in September, investors are waiting for more data to determine whether the bank will cut rates.
The first data will come out today, August 26, when the Conference Board will publish the latest consumer confidence data.
The other two important numbers will be released on Fridays, when the US publishes the latest PCE and jobs numbers, respectively. A sign that the labor market is deteriorating will confirm that the Fed will cut interest rates in September.
Bitcoin Price Wedge Pattern
Technicals have also contributed to the ongoing crypto flash crash. In most cases, Bitcoin is usually the main driver in the crypto market. In this case, there are concerns that the coin has formed the highly bearish rising wedge chart pattern on the weekly chart.
The two lines of this pattern are nearing their confluence level, risking a major crash in the coming months. At the same time, the Relative Strength Index (RSI) and the MACD indicators have formed a bearish divergence, which may trigger more downside in the near term.
Therefore, a move below the lower side of the wedge will confirm the bearish outlook, and point to more downside, potentially to below $100,000. Such a move will lead to more weakness in the crypto market.
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