A crypto crash could be on the way as Christopher Waller, a long-term Federal Reserve dove, has officially turned hawkish as US consumer and producer inflation jumps, and as Bitcoin and Ethereum ETF outflows jump.
Bitcoin price dropped to $76,880 on Friday, down from this month’s high of $82,847. Other top altcoins like Ethereum, Solana, and Ripple (XRP) have remained under pressure in the past few days. The market capitalization of all cryptocurrencies has dropped to $2.5 trillion.
Crypto Crash as Christopher Waller Turns Hawkish
A potential catalyst for a sustained crypto crash is that Waller has warned that the bank’s next move will be a hike. This is notable since he was one of the top doves, voting for interest rate cuts several times since last year. He was also one of the potential successors to Jerome Powell.
His statement comes at a time when market participants have started betting that the Federal Reserve will hike interest rates by the end of the year. If this happens, it will come at a time when the US economy is going through stagflation, which is defined as a period when inflation is rising and the economic growth is slowing.
The most recent data shows that only some pockets of the economy, especially the technology sector, are growing. The labor market has softened, while the headline consumer and producer inflation numbers have moved further away from the Fed’s 2% target.
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US Bond Yields Have Surged
These fears explain why US bond yields have jumped this year. It also likely explains why smart money investors have started dumping their coins. For example, data shows that spot Bitcoin ETFs have shed over $898 million in assets this month. Ethereum funds have shed over $292 million this month.
Technicals also point to a potential crypto crash. For one, Bitcoin has formed a rising wedge pattern on the daily chart, and is now attempting to move below the 50-day moving average. A retreat below that level will point to further downside, potentially to the psychological level at $70,000.
BTC price chart | Source: TradingView
A Bitcoin crash would lead to a steeper crypto market crash since it usually sets the tone in the industry. In most cases, most altcoins tend to drop whenever Bitcoin is falling and vice versa.
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