The cryptocurrency market is currently experiencing a significant downturn, with many traders anxiously awaiting vital economic data and the Federal Reserve’s impending interest rate decision. This crash follows a period where various altcoins saw impressive gains, leaving traders now in a state of profit-taking amidst the price corrections.
For instance, Shiba Inu, one of the most recognizable meme coins, has seen its price plummet over 18% from earlier highs this month. Equally noteworthy, Bonk, the famous Solana meme coin, has entered a bear market, suffering a staggering decline of over 30% since its peak in July. Meanwhile, Treehouse (TREE), a decentralized finance project, has faced a dramatic collapse of over 30% in just the last 24 hours.
As a consequence of these developments, the total market capitalization of all cryptocurrencies tracked by CoinGecko has seen a decline from over $4 trillion to about $3.9 trillion today. This translates to a significant loss exceeding $100 billion in value for investors across the board.
The Role of Bitcoin in the Current Crash
The ongoing crash can largely be attributed to Bitcoin’s recent consolidation at the $118,000 mark. Known as the bellwether for the crypto market, Bitcoin’s fluctuations tend to influence the entire sector. A 1% increase in Bitcoin’s price often leads to a bullish scenario for many altcoins; conversely, any hesitance can trigger widespread selling.
Despite this current bearish trend, Bitcoin’s fundamentals remain robust. There are notable increases in exchange-traded fund (ETF) inflows, and the construction of a bullish pennant pattern suggests that a rebound may be on the horizon. Should Bitcoin rally, it could reignite the interest in altcoins and potentially lead to another market upswing.
For those interested in the altcoin landscape, the potential resurgence of Bitcoin is a point of cautious optimism. As the market awaits confirmations of its next moves, participants are keenly watching the charts and news for signs of recovery.
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Federal Reserve’s Impact and Key Economic Indicators
Another significant factor contributing to the current crypto downturn is the impending decision from the Federal Reserve regarding interest rates. Historically, periods of uncertainty regarding Fed announcements often bring volatility to various asset classes, including cryptocurrencies.
This particular decision arrives at a tense juncture, with trade tensions expected to escalate. Notably, former President Donald Trump has publicly urged the Fed to cut interest rates by 300 basis points, asserting that the absence of inflation should allow for more accommodative monetary policies. Trump argues that high-interest rates have cost the economy upwards of $1 trillion in interest payments.
The Fed’s decision will coincide with the release of critical U.S. economic data, including the Gross Domestic Product (GDP) and the ADP jobs report, due today. Further reports, such as the Personal Consumption Expenditures (PCE) index and nonfarm payrolls data later this week, are also likely to sway market sentiments.
As earnings reports trickle in from numerous S&P 500 companies, including key players in the so-called Magnificent 7, the interconnection between stock performance and the cryptocurrency market becomes increasingly evident. Historical trends indicate that such concentrations of market events can lead to notable fluctuations in both equities and crypto assets.
Investors are also capitalizing on recent gains from tokens like Shiba Inu and Bonk. The sharp price increases found during the earlier parts of the month have led many holders to take profits, contributing to the prevailing downward pressure in the market.
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