The US$100-bn flash crash: Why are cryptos crashing today?

Highlights

• Major cryptocurrencies, such as Bitcoin, Ethereum, Solana, etc., crashed, wiping around US$100 billion from the market.
• On 6 May, the overall crypto market stood at US$1.67 trillion, falling from US$1.81 trillion on Thursday. 
• On 5 May, Bitcoin dropped below US$36000 for the first time since 24 February.

The crypto market on 6 May witnessed a massive freefall due to the sell-off pressure created by the investors. Federal Reserve Chair Jerome Powell had indicated that the US Central Bank won't raise interest rates by more than 50 basis points.

On Friday, the major cryptocurrencies, such as Bitcoin, Ethereum, Solana, etc., crashed, wiping around US$100 billion from the market. Such was the mayhem that the overall crypto market, which was US$1.81 trillion on 5 May, dropped to US$1.67 trillion on 6 May – a significant 7.45% drop in 24 hours. 

Also read: Why is Council of Europe calling for strict crypto regulation?

Bitcoin drops below US$36,000

Bitcoin has been under the pump for a large part of the year. It had been holding on steady, despite bearish trends prevailing in the market. On 6 May too, Bitcoin was trading at US$36,463.29 with a trading volume of US$44,45,94,34,990. The leading cryptocurrency was trailing by 8.31% at the time of writing.

On 5 May that Bitcoin had dropped below US$36000 for the first time since 24 February to touch US$35,856.52 creating panic in the market. 

The market seems to be reeling under the massive sell-off pressure due to the bearish market sentiments. If we look at the chart, Bitcoin’s RSI is at 38.13, indicating that the market participants are keen to sell off their assets and make the most out of the bearish situation. 

Image credit: Trading View

Even the MACD (Moving average convergence divergence line), which indicates the trend following the momentum, suggests that Bitcoin crypto cannot get enough momentum to climb out of the hole. Currently, the MACD line (in blue) is below the signal line (in orange), suggesting that bears have strong control of the token at the moment. 

Also read: Zilliqa crypto (ZIL): Will the token gain further?

However, if one were to look at BTC’s 50, 100 & 200 EMA (exponential moving averages), then there is still something to cheer about, with the chart indicating that BTC may rise out of the hole. 

Ethereum fell to its lowest since 16 March, as it suffered a drop of over 6.73% in the past 24 hours. On Friday, Ethereum was trading at US$2,750.47 with a volume of over US$23,54,11,22,966 over a day.

Solana witnessed a massive freefall, as it was down by 11.04% in the past 24 hours. The 7th ranked token was trading at US$83.26 with a 24-hour trading volume of US$1,82,70,00,544. 

Not just cryptos

The crypto market wasn’t the only one to hit after Fed’s announcement. On Wednesday, all the gains were almost wiped off, with the Nasdaq facing the most significant 1% percent decline since June 2020. The Dow had a day to forget as it witnessed its worst daily performance since October 2020.

The Dow Jones industrial average lost 1,012 points, down 3.0%, while the S&P 500 fell 3.5%, and the Nasdaq fell 4.7%.

Conclusion

With the crypto market witnessing such extreme volatility, it becomes more critical for the market participants to proceed cautiously. Therefore, the market participants must research and understand the market before entering the market. 

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