Cryptocurrency Collapse: Unpacking the Factors Behind This Historic Downturn

Cryptocurrency Collapse: Unpacking the Factors Behind This Historic Downturn

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Investors were taken by surprise on Monday morning as the cryptocurrency market faced a significant downturn, especially affecting altcoins, resulting in a historic liquidation event. What caused this decline? Is the bear market returning? We delve into the reasons behind this unexpected occurrence.

Historic Liquidations in the Cryptocurrency Market

A staggering $2 billion represents the historic amount of liquidations in the cryptocurrency market over 24 hours. This unprecedented decline has pushed the “Fear & Greed Index” into fear territory, signaling widespread concern in the markets—its last occurrence was in October 2024.

At its lowest point, Bitcoin fell to $91,200, marking a nearly 6% decrease in just a few hours. However, altcoins experienced even more substantial losses, with Ethereum down nearly 18%, XRP 20%, and Solana 8%. The total market capitalization dropped by nearly 12% during the low point of this downturn.

This bearish trend can be attributed to three primary factors:

  • Announcement of new U.S. tariffs
  • Low market liquidity failing to contain declines
  • Panic selling leading to a chain reaction

The announcement by former President Donald Trump regarding a 25% tariff on goods from Canada and Mexico is particularly notable. This decision reignited fears of a global trade war, creating widespread anxiety across both traditional and cryptocurrency markets.

Short-Term and Long-Term Concerns

stocks

The threat of a trade war is creating a climate of fear internationally. Most stock indices, including the CAC40, suffered losses at the market opening. The cryptocurrency market is characterized by its high volatility, highlighting its unique nature.

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However, some experts are not overly concerned. Daniel Yan, co-founder of Matrixport, refers to this as a typical “weak Monday.” He attributes the volatility partly to the Asian markets reacting hastily to the news, exacerbating financial movements.

Similarly, Jeff Park, head of strategies at Bitwise, believes that these tariffs are significantly impactful, arguing that the United States might be looking for a way to weaken the dollar without compromising their ability to borrow cheaply.

For many, tariffs are viewed merely as a strategic tool. However, in the long term, the implications for Bitcoin could be noteworthy. In the short term, significant declines are observed, but looking ahead, a weaker dollar, lower U.S. interest rates, and economic uncertainty could bolster Bitcoin.

There is no better advertisement for Bitcoin than an uncertain and endangered traditional market. In this context, for those holding smaller portfolios in search of inaccessible insights, there is a notable presale: the Wall Street Pepe.


Disclaimer: Cryptocurrencies are a high-risk asset class. This article is for informational purposes only and does not constitute investment advice. You could lose all your capital.


Source: CoinMarketCap


Further Reading:

  • Why is the cryptocurrency market plummeting?
  • What if the altcoin season is absent from this cycle? The concerning theory
  • Discover these three altcoins with high potential for 2025

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Richad AddouExpert Crypto Writer

Richad AddouExpert Crypto Writer

Richad has a unique background. Initially trained as a nurse, he became interested in cryptocurrencies in 2021 amidst the growing enthusiasm for the digital asset market. Convinced by Bitcoin’s message and transformative potential, he became deeply passionate about this field. After exploring major cryptocurrencies like Bitcoin, Ethereum, and Solana, Richad focused on Avalanche, captivated by its innovative technology and ambitious goals. He even launched his own NFT project on this network, which is particularly close to his heart. Now, as a writer for ActuFinance, he melds his two favorite pastimes: writing and cryptocurrencies, sharing his enthusiasm and knowledge with a broad audience. His aim is to continue exploring the cryptocurrency landscape while helping others navigate this complex and ever-evolving domain.

View all articles by Richad Addou


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