Bitcoin, Ethereum, XRP, and other top altcoins are in a relentless sell-off that has cumulatively erased over $2.5 trillion since their peaks last year. BTC moved briefly below $60,000, while ETH and XRP dropped to $1,500 and $1.06, respectively. This article explains why the crypto market crash is happening and why the Fear and Greed Index may trigger a rebound.
Top Reasons Behind the Crypto Market Crash
There are several reasons behind the ongoing crypto market crash. First, the Bureau of Labor Statistics (BLS) released strong jobs numbers on Friday. This report showed that the economy added over 172k jobs in May, more than double what analysts were predicting.
Two separate reports showed that the labor market was fairly strong. An ADP report revealed that the private sector added 122k jobs, while another one by the BLS showed that the number of job vacancies jumped sharply in April.
In theory, a strong jobs report should be bullish for the stock and crypto market. However, it is also a sign that the Federal Reserve will start hiking interest rates, with Wall Street predicting two hikes later this year.
READ MORE: Are the Kospi, Nasdaq 100, and Nikkei 225 Indices Contributing to the Crypto Crash?
Second, the crypto market crash is happening because of the ongoing liquidity drain in the industry as investors pile into the AI stocks. A good example of this is the recently launched DRAM ETF, which has already accumulated over $16 billion in assets in the past few months.
Third, this is happening because of the upcoming SpaceX, OpenAI, and Anthropic IPOs that will raise billions of dollars. There is a likelihood that some investors are selling their holdings as they wait to allocate cash to these assets.
Additionally, investors have continued dumping their Bitcoin and Ethereum ETFs. Spot Bitcoin ETFs have shed over $1.72 billion in assets this month after they lost $2.4 billion in the next one. Ethereum funds also lost over $168 million this week. That is a sign of capitulation among investors.
Crypto Fear and Greed Index Points to an Eventual Rebound
On the positive side for the crypto market, data shows that the Crypto Fear and Greed Index has tumbled to the extreme fear zone of 13, its lowest level since February.
Crypto Fear and Greed Index | Source: CMC
Historically, crypto tokens stage a relief rally whenever the index drops to these extreme levels. This happens as investors go bargain hunting. A good example, as shown above, is what happened earlier this year, when it tumbled to $8. At the time, the Bitcoin price plunged to $60,000, and then it resumed the uptrend, peaking at over $80,000 in a few months.
BTC price chart | Source: TradingView
The other potential catalyst for the crypto market rally is that, as the chart above shows, Bitcoin price has become highly oversold. The Relative Strength Index has dropped to an extreme low of 14, signaling potential rebound as investors go bargain hunting.
There are also signs that the coin has formed a double-bottom pattern whose neckline is at $82,495. Assets normally rebound whenever this pattern happens.
READ MORE: Stock Market Crash: Why S&P 500, Dow Jones, and Nasdaq 100 are Going Down
