A crypto crash is underway today, Dec. 23, with Bitcoin and most altcoins being in the red, and the market capitalization of all coins falling by 2.45% to $2.95 trillion.
Bitcoin (BTC) declined by 2.1% to $87,300, while Solana, Cardano, Chainlink, and Zcash dropped by over 3%. Most of these coins remained in a bear market.
The crypto crash is happening because…
Investors remain on the sidelines ahead of the Christmas holiday. Data compiled by CoinGlass indicate that futures open interest declined by 1.5% over the past 24 hours to $128 billion. The volume in the spot market also dropped to $100 billion.
Bitcoin and other cryptocurrencies rose following the release of strong U.S. macroeconomic data. According to the Bureau of Economic Analysis, the economy expanded by 4.3% in Q3, partly attributable to ongoing data center spending. The growth exceeded the median estimate of 3.3%.
Additional data indicated that the country’s industrial and manufacturing output rose in November. Therefore, these numbers mean that the Federal Reserve may not have the urgency to cut interest rates in the coming year. Cryptocurrencies usually do well when the Federal Reserve is cutting rates.
The crypto crash is happening as investors position themselves for potential risks ahead. One sign of this is the ongoing surge in the Swiss franc and gold prices. Additionally, some large companies (i.e., Apollo Global Management) started moving to cash as risk increased.
The other main reason behind the ongoing crypto crash is that Bitcoin and Ethereum have formed bearish patterns on the daily and weekly chart.
As the chart above shows, Bitcoin is forming a bearish pennant pattern, a typical continuation pattern. This pattern consists of a vertical trendline and a symmetrical triangle.
Bitcoin formed a death cross pattern, which occurs when the 50-day and 200-day moving averages cross. It has also dropped below Supertrend indicator.
Therefore, these patterns mean that Bitcoin may be at risk of more downside in the near term. A bearish breakout will likely lead to more weakness in the broader crypto market.
