There are two reasons, the first is Trump.
Trump appointed a new candidate for the Federal Reserve chairman, and this financial mogul leans towards hawkish monetary policy. This clearly broke the market's previous expectations, causing the dollar index to strengthen significantly. As we all know, the dollar and gold are opposites. When the dollar is strong, gold is weak; when gold is strong, the dollar is weak. Therefore, gold and silver, priced in dollars, suddenly weakened in the early morning, creating a typical seesaw effect of 'strong dollar, weak gold and silver.'
The second reason is that gold and silver rose too much a while ago. After the news from the Federal Reserve came out, many people thought it was better to cash in first. However, there were too many smart people, and many chose to take profits. Moreover, many people in precious metals were heavily leveraged, which ultimately led to an epic stampede in selling, breaking records for plummeting prices!
The wise have already made their profits and left; those remaining are gamblers! Why is the cryptocurrency market crashing?
The cryptocurrency market crash is triggered by several factors. One of the most significant is that Donald Trump's likelihood of attacking Iran has been steadily rising on Polymarket. This probability has now jumped to over 80%, with his fleet deployed near Iranian waters.
The drop in Bitcoin and other altcoins is due to such attacks leading to rising oil prices and volatility in financial markets. This concern is particularly evident as Bitcoin's role as a safe-haven asset continues to diminish.
The cryptocurrency crash is also ongoing, with memories of the October 10 liquidation event still fresh. This event occurred after Trump warned about possible tariffs on China. Since then, leverage in the crypto industry has largely disappeared, with futures liquidation contracts rising from $255 billion to $113 billion.
Other reasons for the ongoing cryptocurrency crash include Trump's appointment of inflation hawk Kevin Warsh as the next Federal Reserve chair. Market participants initially expected Rick Rieder from BlackRock to be mentioned.
Will the crypto market recover?
Investors are questioning whether the crypto market can recover in the short term. Notable analyst and BitMine chairman Tom Lee believes that the ongoing cryptocurrency crash will soon come to an end. He points out that historically, Bitcoin always reemerges after a significant drop.
For example, Bitcoin fell more than 30% between its peak in March and its lowest point in August. It then rebounded, reaching an all-time high in November. It also dropped below $16,000 in December 2022, followed by a rebound.
There may be some catalysts for a potential recovery in the crypto market. For instance, the continued decline of the dollar index typically leads to increased demand for high-risk assets. Furthermore, the Federal Reserve is likely to resume rate cuts soon.
Additionally, there are signs that Bitcoin and top altcoins have become undervalued assets, as their MVRV indicators have declined.
Therefore, the most likely scenario is that the cryptocurrency crash will continue, followed by a rebound later this year.
