Crypto market crash: 3 key reasons which triggered the market crash

TL;DR Breakdown:

  • The global crypto market is down over 17% since yesterday.
  • Live exchange data indicate large-scale sell-off in the last 24 hours. 
  • The crash was triggered by panic-selling due to several recent events in the industry. 

The global cryptocurrency market is down by over 17% in the last 24 hours. While a crypto market crash in December was anticipated by experts, the scale above 10% was significantly surprising for most investors. We entered the bear market in early November and the bulls occasionally pulled back earlier last week due to some major metaverse project announcements surrounding crypto. 

However, increasing FUD surrounding the new Covid variant and stock market plunge has caused crypto prices across the market to crash below their predicted support zone. 

Crypto market crash: 3 key reasons which triggered the market crash 2
Crypto Fear & Greed Index

A summary of what’s happening in the market today 

Bitcoin prices have plunged below $50K for the first time in 2 months. Bitcoin was trading at around $43.5K earlier today, its lowest since September. BTC has since made a climb back up to the $47K zone. 

The major surprise however was Etehreum. ETH is down by almost 15% in the last 24 hours. The altcoin was showing tremendous support above the $4K range during November’s bear market but went down to $3,497 earlier today, its lowest since September. ETH has since made a slow climb back up to $3.9K. 

Litecoin suffered the biggest blow among the top 20 cryptocurrencies, as the altcoin is down over 25% in the last 24 hours. Metaverse coins Sandbox (SAND) and Decetraland (MANA) also suffered a blow above 20% in today’s crash. 

Let’s see what’s actually causing today’s crypto market crash. 

Exchange Reserve sharply increased 

All exchanges reserve is a metric that shows the total amount of crypto being held in centralized crypto wallets. There has been a sharp increase in both BTC and ETH all exchange reserve flows. This means that more investors are depositing their crypto for fiat withdrawal, which suggests a high rate of liquidity and crypto sell-off. 

crypto market crash
Live data from CryptoQuant

Estimated Leverage Ratio Hit the All-time High

The estimated Leverage Ratio indicates the average amount of leverage used by crypto investors. As the leverage ratio for both Bitcoin and Ethereum hit an all-time high yesterday on the Binance exchange, it indicates that crypto traders currently hold a high-risk sentiment towards trading. Again, this is led to a large-scale sell-off since yesterday, causing the crypto market crash. 

crypto market crash
Live data from CryptoQuant

Exchange Whale Ratio hit the three-year high 

Earlier last week, the BTC Exchange Whale ratio surged to 91%, a three-year high. The exchange Whale ratio indicates the approximate size of the top 10 deposits compared to the total deposit volume across all exchanges. 

When the ratio reaches significantly over 85%, it indicates mass-dumping, suggesting that whales are liquidating their crypto assets. Also when the exchange whale ratio surges, it creates fear among relatively small investors. 

Crypto market crash: 3 key reasons which triggered the market crash 3
Live data from CryptoQuant

The crypto market crash is largely triggered by panic selling 

Overall, the key trigger behind today’s crypto market crash is panic selling. Earlier this week, billionaire American investor Charlie Munger lashed out at cryptocurrency, saying that he wishes crypto had never been invented. 

Also, the $10 million hack of BadgerDAO and India’s crypto regulation plans contributed to the panic selling. There were also concerns about the new Covid-19 variant, which could negatively impact the global financial state that is still trying to recover from the pandemic. 

Although the veteran and experienced investors are not phased by such events, new investors are easily giving in to the FUD, resulting in a large-scale crypto sell-off. However, not everyone is seeing the crypto market crash as a negative event. The CEO of Tron and El Salvador has already bought into the dip, adding more Bitcoins to their crypto wallets. 

Some experts are also indicating that today’s crypto market crash resembles the bull market pattern of 2017, which later saw Bitcoin and other altcoins skyrocket. For now, it’s time to sit back and assess, as the crypto market seems to be dipping further going into the weekend. 

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