Is the Crypto Crash Just Starting? Here’s What’s Happening

Crypto prices are plummeting to levels not seen since 2022, when major companies like FTX and Terraform Labs crashed, threatening the entire industry. This time, however, the reasons for the drop are more complex. Major digital assets like Bitcoin and Ethereum have fallen up to 25% in a single day.

While cryptocurrencies were once seen as a safeguard against traditional financial downturns, their recent decline mirrors a broader stock market selloff triggered by a disappointing jobs report and slow Federal Reserve actions. Bitcoin, hovering around $50,000—a level it hasn’t seen since February—has dropped from over $65,000 in July, suggesting more turbulence ahead.

On Sunday and early Monday, Bitcoin fell below $50,000, a key psychological level for investor confidence, marking a 20% drop from the previous week. Other tokens, including Ethereum and Solana, saw a weekly decline of over 30%. By Monday afternoon, Bitcoin had slightly recovered to around $53,000.

This crypto crash aligns with setbacks in the U.S. economy. After a strong July, the stock market fell last week due to a sluggish jobs report and an unexpected rise in the unemployment rate. The Dow Jones dropped over 600 points, and traders were disappointed by the Federal Reserve's decision to keep interest rates steady. Although a rate cut is expected in September, Wall Street fears it may be too late.

Despite recent positive news, such as the launch of Ethereum ETFs, the crypto market cap has fallen from over $2.5 trillion in late July to about $1.9 trillion, marking the worst loss since 2022. CoinShares reported over $500 million in outflows from digital asset investments, and Wintermute noted that more than $1 billion in crypto positions were liquidated overnight. Market volatility is rising as traders react to the uncertainty.