- The crypto market crashed today amid rising geopolitical tensions.
- Bitcoin dropped to $73,000, while the market capitalization of all tokens fell by 3%.
- Spot Bitcoin and Ethereum ETFs experienced major outflows.
A crypto crash is underway today, May 28, with Bitcoin and top AI coins like Worldcoin (WLD), Virtuals Protocol (VIRTUAL), Internet Computer (ICP), and Venice Token (VVV) leading the charge.
Bitcoin price retreated to $72,000, while these AI coins dropped by double digits, erasing millions of dollars in value. Their pullback is notable as these tokens were among the best performers this year because of the upcoming OpenAI IPO.
In most cases, the best-performing tokens experience the biggest drawdown when there is a crash as investors rush to book their profits.
Crypto Crash Triggered by Geopolitical Tensions
The main catalyst for the ongoing crypto crash is the rising geopolitical tensions as the ceasefire between the US and Iran frays. This happened after the US launched strikes against some Iranian targets. In a statement, CENTCOM said that it attacked some targets as part of its self-defense, while insisting that the ceasefire was intact.
The attacks came a few hours after President Donald Trump warned that he was not highly concerned about the mid-term election. That is a sign that the war may restart, as some of his closest allies like Mark Levin, Senator Lindsey Graham, and Senator Ted Cruz suggest.
A new phase of the war would be risky for Bitcoin and the crypto market as it would drive oil prices higher. It would also push inflation much further than where it is today, pushing the Federal Reserve to hike interest rates. Indeed, Christopher Waller, a highly dovish Fed Governor, has warned that the Fed will need to hike rates if inflation remains elevated.
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Bitcoin and Ethereum ETF Outflows as Investors Rotate to Stocks
The other likely reason behind the ongoing crypto crash is that Bitcoin and Ethereum ETFs have experienced substantial outflows this month. Data shows that the spot Bitcoin ETFs shed over $733 million on Wednesday, bringing the monthly outflows to over $2 billion.
Spot Ethereum ETFs also shed substantial assets on Wednesday. They lost about $67 million in assets, the 12th consecutive day of outflows. They have now shed over $401 million this month, completely erasing the $355 million inflows experienced in the previous month. In total, these funds have lost over $815 million in assets this year.
One possible reason for the ongoing Bitcoin and Ethereum ETF outflows is that investors are simply moving to the better-performing stock market. For example, US stocks attracted over $25 billion in inflows last week, with VOO racing towards the $1 trillion asset mark.
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