The crypto market crash accelerated on Saturday as the futures open interest dipped and liquidations soared to over $1.6 billion, the highest level in weeks. This article explores whether the crypto industry will recover as the sell-off intensifies.
Summary
- The crypto market crash intensified on Saturday.
- The drop continued as liquidations jumped to over $1.6 trillion.
- The crash will likely continue and then recover later this year.
Why the crypto market crash is happening
The crypto market crash is being triggered by a few factors. One of the most notable ones is the fact that the odds that Donald Trump will attack Iran soon continued rising on Polymarket. These odds have now jumped to over 80%, with his armada nearing Iran.
Bitcoin (BTC) and other altcoins are dropping because such an attack will lead to higher oil prices and volatility in the financial market. This fear is notable now that Bitcoin’s role as a safe-haven asset have continued falling.
The crypto crash is also happening as memories of the October 10 liquidation event remain. That event happened after Trump warned of potential tariffs against China. Since then, leverage in the crypto industry has largely disappeared, with the futures open interest moving from $255 billion to $113 billion.
The other reasons for the ongoing crypto crash is that Trump appointed Kevin Warsh, an inflation hawk as the next Federal Reserve Chair. Market participants were expecting BlackRock’s Rick Rieder to be mentioned.
Will the crypto market recover?
The question among investors is whether the crypto market will recover in the near term. Tom Lee, the popular analyst and BitMine Chairman, believes that the ongoing crypto crash will end soon. He noted that historically, Bitcoin always emerges from major dives.
For example, Bitcoin dropped by over 30% between its highest point in March and its lowest point in August. It then rebounded and moved to a record high in November. It also plunged below $16,000 in December 2022 and then rebounded.
There are some potential catalysts for the crypto market to recover eventually. For example, the US dollar index continues falling, which often leads to more demand for risky assets. Also, the Federal Reserve will likely resume cutting interest rates soon.
Additionally, there are signs that Bitcoin and top altcoins have become bargains as their MVRV indicators have slumped.
Therefore, the most likely scenario is where the crypto crash continues and then rebounds later this year.
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