What triggered the great cryptocurrency crash?

The Big Friday Crypto Selloff, which occurred on June 7, 2024, led to the price of Bitcoin falling below $70,000.

The sudden drop in BTC also had a ripple effect on other cryptocurrencies such as DOGE, Ripple and Ethereum, which went lower and experienced significant liquidations and price fluctuations. The steep and sudden change in cryptocurrencies was a reminder of the volatility and potential price swings of the cryptocurrency market.

The sudden price swings of Bitcoin and other altcoins have also impacted various cryptocurrency-related industries, including cryptocurrency trading and investment companies, cryptocurrency exchanges, wallet providers, gaming token centers, and various other businesses .

However, even after the market corrections that led to the collapse of prices, several market experts believe that a new recovery is just around the corner.

What caused the sudden market crash?

The events that triggered the decline in cryptocurrency prices on Friday resulted from a combination of factors that worked together to form a chain reaction recipe for market collapse.

The main factors that led to the accident were:

1. The US employment report

A US employment report recently revealed that there was an increase of 272,000 jobs in May this year. This unexpected growth has changed expectations that the Federal Reserve will cut interest rates, resulting in higher interest rates and a strengthening US dollar. Therefore, rising interest rates, combined with the powerful dollar, have exerted a negative impact on the prices of cryptocurrencies, among other assets.

Essentially, the jobs data was seen as a negative surprise by investors who were expecting a much weaker report that would increase the chances of a rate cut. This has led to the disappointment of those who were hoping for a more accommodative monetary policy, which is typically seen as beneficial for high-risk investments such as cryptocurrencies.

2. GameStop shares

GameStop’s stock performance has significantly influenced the cryptocurrency market. GameStop’s stock price saw significant changes, falling 25% in pre-market trading, followed by a surge at market open. This unpredictability was attributed to the return of Roaring Kitty, a popular trader who had previously driven the stock price up more than 800%.

GameStop’s stock price fluctuation has caused a domino effect on the cryptocurrency market. GameStop’s sudden share price swings have led to increased market activity and investor distress, resulting in substantial liquidations and price fluctuations in cryptocurrencies such as Bitcoin. Additionally, the hype surrounding GameStop stock has led to the launch of several meme coins inspired by GameStop, AMC, and Roaring Kitty. This activity has contributed to increased speculation and market instability in the cryptocurrency industry.

3. Negative sentiments halt BTC’s all-time high

Bitcoin encountered significant resistance at $72,000, which prevented it from breaking through and reaching all-time highs. This resistance was more likely due to market sentiment, investors becoming more cautious and selling their positions, as well as technical analysis playing a major role in the decline.

The decline in the price of Bitcoin has been quite significant, with a decline of 2.5% in the previous 24 hours. This potentially had more to do with selling pressure and resistance. The price drop had a ripple effect across the market, with many altcoins suffering substantial losses.

Impact on the market

The big sell-off in the cryptocurrency market, especially the drop in Bitcoin’s price below $70,000, has had a negative impact on the market.

Impact on Altcoins

The sell-off led to a drop in the prices of several altcoins, with some experiencing double-digit percentage losses:

• Ethereum (ETH): Ethereum fell 4% during the sell-off, a rather modest drop compared to other altcoins. However, this still represents a loss for investors who have maintained their position in ETH.

• Solana (SOL): Solana was one of the hardest hit altcoins, losing 10% during the sell-off. This decline was huge as Solana has been one of the most popular and valued altcoins in recent months.

• EOS: Just like Solana, EOS also fell by 10%, marking a significant decline for a cryptocurrency that has a historical reputation for stability.

• Dogecoin (DOGE): Dogecoin’s decline is quite notable as it has been a popular meme coin for the past few months. The altcoin fell 8% during the sell-off, which represents a significant drop.

Liquidations

The fire sale resulted in liquidations of more than $450 million, the largest amount since the mid-April market crash. These liquidations are important as they show a large amount of selling activity in the cryptocurrency market which can have several negative effects on the market, including:

• Impact on prices: Asset sales could potentially influence cryptocurrency prices. In this case, the liquidations led to the price of Bitcoin collapsing from $72,000 to $69,999.

• Market sentiment: Sudden, large-scale liquidations could potentially lead to a decline in market sentiment, as investor confidence has declined making them more reluctant to engage in riskier investments. This could lead to a broader market downturn.

• Market dominance: Liquidations could also affect Bitcoin’s dominance in the market. As the largest cryptocurrency by market capitalization, Bitcoin’s price decline impacts its market dominance, potentially creating the possibility for other altcoins to gain more market share.

Inflows into ETFs

Market dynamics were affected by the sell-off which caused a decrease in market liquidity and depth. This has made it more difficult for investors to trade cryptocurrencies, leading to a reduction in ETF inflows. Investors are showing a certain caution and are increasingly less inclined to invest in cryptocurrencies. The notable decline in ETF inflows is significant, down more than 50% on the month.

Impact on the cryptocurrency market

The cryptocurrency sell-off has had several implications for the market, and investors are finding it more difficult to predict the cryptocurrency’s future value. A decline in investment can impact economic growth by causing a decline in market confidence. Beyond that, negative perceptions in the market can also negatively affect several companies and services within the crypto ecosystem.

For example, an investor, who is a crypto-casino player, will be affected by the sell-off and will see the value of his cryptocurrency holdings decrease. This not only reduces their willingness to invest in crypto services or products, but their reluctance to use a service will impact their usage of their crypto wallet provider. This could potentially mean a drop in revenue for the wallet provider.

This also has a knock-on effect on the best crypto casinos the investor uses. The crypto casino relies on the wallet provider to manage the player’s crypto holdings, if the investor no longer has faith in the market, they may be less likely to use their cryptocurrency in a casino, impacting the company’s profitability and flows of revenue. This highlights how negative sentiment can spread and impact companies in the crypto ecosystem.

Conclusion

The big Friday June 7 cryptocurrency sell-off is a reminder of the volatility and uncertainty of the cryptocurrency market. This simply demonstrates the importance of market sentiment and regulatory certainty and how they can influence the value of cryptocurrencies. This trigger saw Bitcoin fall below $70,000 due to the US jobs report and subsequent rise in interest rates, which impacted the value of several altcoins, causing significant losses and uncertainty for investors.

Source