The crypto market started crashing during the early Asia hours on Friday, with the crypto market cap falling nearly 4% to $3.74 trillion from $3.87 trillion.
Bitcoin (BTC) dropped 3% to below $115K and Ethereum (ETH) price tumbled over 6% to $3,600 amid intense selling pressure.
Altcoins such as XRP, BNB, Solana (SOL), Cardano (ADA), and SUI tanked 7-12%. Whereas, meme coins Dogecoin (DOGE), Shiba Inu (SHIB) and Pepe Coin (PEPE) sank 10%.
Also, the Crypto Fear & Greed Index slipped from 72 to 65 (greed), indicating the positive sentiment waning among traders.
5 Reasons Why the Crypto Market Crashed
Several headwinds acted on the crypto market to influence selloffs by retail and institutional investors. These were the top 5 primary reasons behind the crypto market crash.
1. Macro and Tariffs Led Crypto Market Crash
Macro factors once again triggered a massive sell-off in Bitcoin price. Core PCE inflation rose 0.3% month-over-month, taking the annual PCE inflation increase up to 2.6%.
Also, the CPI inflation in the United States accelerated to 2.7% and the labor market remained strong as traders look for further cues. This caused the FOMC to keep the interest rate unchanged at 4.25%-4.50%.
Fed Chair Jerome Powell said the impact of tariffs on inflation was clearly noticed in the inflation reports. At the time of writing, the CME FedWatch tool showed only one 25 bps rate cut by December.
However, President Donald Trump on August 1 confirmed that the Federal Reserve Board will take control if Powell refuses to cut rates.
2. Over $7 Billion in Bitcoin and Ethereum Options Expiry
Crypto trades mostly turn cautious near Bitcoin and Ethereum options expiry. Also, options traders adjusted their positions after Deribit saw the largest Bitcoin put options in its history to target BTC price crash under $110K by August 8.
BTC options of a notional value $5.72 billion expired on Deribit today. Also, ETH options with a notional value of $1.35 billion expired.
Bitcoin price fell below the max pain price of $116,000 as traders were liquidated or closed their positions.
3. Outflow from Spot Bitcoin ETFs and Other Bitcoin Funds
Spot Bitcoin ETFs saw $114.8 million in outflow on Thursday. BlackRock’s IBIT recorded a modest $18.6 million in inflows.
Fidelity’s FBTC, ARK 21Shares’s ARKB, and Grayscale’s GBTC recorded $53.6, $89.9, and $9.2 million in outflows.
Notably, the latest CoinShares data for global Bitcoin funds revealed that inflows into Bitcoin were completely wiped out, as it recorded $175 million in outflows. This indicated capital rotation and selloff by institutional investors.
Analyst Ali Martinez predicted $107,000 as the next level to watch. Bitcoin broke critical support at $116,950 during the crypto market crash.
4. Crypto Market Crash With Massive Liquidations
CoinGlass data revealed that nearly $1 billion in crypto were liquidated, with almost 200K traders liquidated in the last 24 hours.
The largest single liquidation order of ETHUSDC, valued at a massive $13.79 million, occurred on crypto exchange Binance.
Nearly $900 million in long positions and over $100 million in short positions were liquidated. The most liquidated altcoins were SOL, XRP, DOGE, SUI, ENA, and ADA
The liquidation of massive traders caused a crypto market crash. Solana and Ethereum-based tokens were most liquidated in the last 24 hours.
5. On-Chain Data Signals
Bitcoin Percent Supply in Profit remained above 90% for over a month. Glassnode claimed that when nearly all holders sit on gains, pressure to book profits rises.
It added that the Cumulative Mean +1 Standard Deviation of the metric was at 91%. This was marked as a key level to watch as a break lower could signal further selloffs.
Bitcoin Coinbase Premium Gap turned negative a few days ago, indicating weakening demand in the US market. Meanwhile, Kimchi premium remains negative, indicating Asian markets are shorting Bitcoin
