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coinpedia 2025-02-03 04:56:04

Why Is Crypto Crashing Today?

The post Why Is Crypto Crashing Today? appeared first on Coinpedia Fintech News The crypto market is facing a massive sell-off, wiping out over $400 billion in just 24 hours. Major cryptocurrencies like Bitcoin, Ethereum, XRP, and Dogecoin have all taken a hit, with some dropping by nearly 20%. But what’s causing this sudden crash? Let’s dive into the key reasons behind the turmoil. Trump’s Tariff War Sparks Fear One of the biggest reasons behind the market drop is the recent trade war sparked by former U.S. President Donald Trump. Declaring a national emergency under the 1977 International Emergency Economic Powers Act (IEEPA), Trump imposed strict tariff rules, 25% on Mexico and Canada and 10% on Chinese imports. pic.twitter.com/SWZtSm6NMX — Donald J. Trump (@realDonaldTrump) February 1, 2025 The market reacted instantly, fearing higher prices, rising inflation, and economic instability. As a result, U.S. stock indexes fell sharply, dragging the crypto market down with them. Bitcoin Network Activity Slows Down Aside from external economic factors, Bitcoin’s network activity has declined significantly. Data from CryptoQuant shows that the mempool is nearly empty. This means fewer transactions are taking place, which is unusual for Bitcoin. Additionally, Bitcoin transaction fees have fallen to just 1 sat/vB, signaling low demand for block space. This is the lowest level of activity recorded since March 2024. Crypto Sees $2.18 Billion in Liquidations The market has also seen a wave of liquidations, with over $2.18 billion worth of crypto positions being wiped out in a day, affecting more than 715,000 traders. Long traders suffered the most, losing $1.85 billion, while short traders lost around $334 million. The largest single liquidation happened on Binance, where one trader lost $25.64 million in a single trade. Stronger U.S. Dollar Adds Pressure Another factor weighing down Bitcoin is the strengthening U.S. dollar. The U.S. Dollar Index (DXY) has surged to 108.50, while the 10-year Treasury yield has risen above 4.54%. Historically, Bitcoin moves in the opposite direction of the dollar and Treasury yields, meaning a stronger dollar often leads to lower BTC prices. Bitcoin’s Critical Support Level Currently, Bitcoin is struggling to hold above $93,000 . If it falls below the psychological support level of $90,000, analysts warn that further declines could be ahead. Meanwhile, the Crypto Fear & Greed Index has fallen to 38, shifting from Neutral to Fear. However, if BTC manages to recover and break above $95,000, it could regain its bullish momentum.

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