A crypto market crash is happening today, January 25, with Bitcoin and most altcoins being in the deep red. Bitcoin plunged below $88,000, while Ethereum dropped to $2,800.
The market capitalization of all tokens moved below the key support level of $3 trillion, while the CoinMarketCap 20 Index dropped by over 2.2% in the last 24 hours and by 10% in the last seven days. This article explores the top reasons for the crypto crash today.
Crypto Market Crash Happening as Bitcoin Forms Bearish Pattern
One main reason the crypto market is crashing is that Bitcoin’s price has formed a series of bearish chart patterns on the daily and weekly timeframes. For example, the daily timeframe chart shows that the coin has remained below the Supertrend indicator and the 50-day Exponential Moving Average (EMA).
The Bitcoin price has also formed a risky bearish flag pattern, consisting of a vertical line and an ascending channel. It is now attempting to move below the flag’s lower boundary, pointing to further downside, potentially to the November low at $80,400. A drop below that level will signal more downside, 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 Bitcoin retreat often leads to further downside for the broader crypto market, while a rebound triggers a crypto rally.
Fear and Greed Index Moved to the Fear Zone
Another reason the crypto market is crashing is that the Crypto Fear and Greed Index continues to move downwards. Data compiled by CoinMarketCap shows that the index dropped to the fear zone at 34, down from its year-to-date high of 59.
The index has dropped amid major market risks. For instance, there is a risk that the Federal Reserve will maintain a hawkish stance this year following strong macro data from the United States.
Data released last week showed that the economy continued to grow in the third quarter, and analysts believe it grew by 5% in the fourth quarter. More data showed that the labor market improved, while inflation has stabilized.
The other risk is that the US has threatened to launch a trade war against Canada, its biggest trade partner. Trump warned that he would impose a 100% tariff on all goods coming from the country, while Canada has hinted that it will retaliate.
Meanwhile, there is a risk of a government shutdown in the coming 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.
Bitcoin and the crypto market have dropped amid signs that investors are rotating into other, better-performing assets. For example, data shows that spot Bitcoin ETFs have shed over $1 billion in assets this year, while gold and silver ETFs have added billions of dollars in assets.
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