The crypto market is crashing today, with Bitcoin and most altcoins being in the red. After hitting $87,000 earlier this week. Bitcoin has slumped to $83,830, while Ethereum fell to $2,670. Top altcoins like Arbitrum, Pepe, Uniswap, and Official Trump were among the top laggards as they fell by over 11%. So, why is the crash happening today?
Top laggards in crypto market today | Source: SoSoValue
Crypto market crash is driven by the soaring bond yields
The main reason why cryptocurrency prices are falling today is that the bond market in the United States and other countries is struggling. Data shows that the ten-year yield jumped to 5.1% on Wednesday and the uptrend is continuing. The 2-year yield rose to 4.90%, while the 30-year surged to 5.4%.
The bond market is being driven by the rising crude oil price, which has driven gasoline and diesel prices higher. Diesel has jumped to a record high, while gasoline has jumped by double digits since January. Higher energy prices mean that inflation will likely continue rising in the foreseeable future.
As a result, there is a likelihood that the Federal Reserve will intervene and continue hiking rates. It has already hiked rates by 0.25%, and market participants expect that it will deliver another one later this year.
Bitcoin and other altcoins normally underperform the market whenever interest rates are in an uptrend. A good example of this is what happened in 2022 as the Fed hiked rates. Bitcoin dropped to about $16,000, while companies like FTX and Terra collapsed.
The rising bond yields also explain why other assets are going down. Precious metals like gold and silver retreated, and so did the stock market, with futures tied to the Dow Jones and S&P 500 falling by 142 and 25 points, respectively.
Crypto crash happening amid profit-taking
The crypto market is slipping as investors start booking profits after the recent surge. Indeed, a closer look at the top laggards today shows that they were the best performers earlier this week.
Arbitrum dropped by 14% in the last 24 hours and by 15% from its highest level this week. Before this retreat, it was up by 263% from its lowest level in August, driven by the ongoing Robinhood Chain growth.
Similarly, Uniswap price has slumped by 13.78% in the last 24 hours to $9.25. UNI had jumped by 240% from its August lows, helped by the change of policy by the Securities and Exchange Commission (SEC), which gave an innovation exemption to allow tokenization. Other top laggards like Worldcoin, Pepe, and Dogecoin were also up by double digits from their August lows.
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This profit-taking is happening after most coins become highly overbought, with the Relative Strength Index (RSI) of many of them soaring to over 70.
There are two potential options going forward. The retreat may be brief, leading to a bullish reversal. Alternatively, it may be the start of a new bearish trend in the crypto market. The most likely scenario is where most coins retreat and then bounce back as investors buy the dip.
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