A crypto crash resumed on Wednesday as Bitcoin and other altcoins dropped. Bitcoin price dropped to $90,000, while the top laggards included Virtuals Protocol, Pudgy Penguins, Dash, and Ondo. This article explores some reasons for the crypto market crash.
Crypto Crash Happening as Bitcoin Price Hits Key Resistance
One of the main reasons the crypto market is crashing is that the Bitcoin price has faced substantial resistance. As the chart below shows, the coin faced resistance at $94,516, a level it failed to move above in December.
BTC also failed to flip the 50-day Exponential Moving Average (EMA) and the Supertrend indicator from red to green, indicating that bears remained in control.
Bitcoin, which influences the performance of other cryptocurrencies, also formed a doji candlestick pattern. This pattern consists of a small body with lower and upper shadows and is a common bearish reversal sign.
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Therefore, there is a risk that the coin will continue to fall in the near term, which could affect the performance of other tokens. A bullish breakout, on the other hand, will be confirmed if it moves above the key resistance level at $94,515.
Profit-Taking as Volume Slumped
The crypto market crash also happened as investors started to book profits after the recent rebound that pushed most tokens higher. It is common for cryptocurrencies and other assets to retreat after rising by double digits.
Indeed, a closer look shows that the top laggards were the best gainers in the past few days. For example, the VIRTUAL token jumped by 87% from its lowest level on January 1 to its highest point on January 6. Similarly, the Pudgy Penguins token was up by 65% in this period.
More data show that crypto industry volume dropped sharply, a sign that investors embraced a risk-off sentiment. Its 24-hour volume dropped by 19% to $110 billion, while liquidations soared.
Simultaneously, the crypto market crashed as demand for cryptocurrency ETFs declined. Data from SoSoValue reveals that spot Bitcoin ETFs lost over $243 million in assets on Tuesday after gaining $697 million the previous day.
Meanwhile, there are signs that the January Effect is fading. The January Effect is a phenomenon in which financial assets rally in the first few days of the year and then retreat as momentum fades. The same is also happening in the stock market, where top indices like the Dow Jones, S&P 500, and the Nasdaq 100 indices retreated.
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