A steep crypto crash happened on Friday, leading to one of the biggest bloodbaths in the industry this year. Bitcoin price crashed to a low of $106,867, down by over 11% from its highest level this year.
Altcoin had a worse performance, with some of the top laggards being tokens like Ethena (ENA), Mantle (MNT), Filecoin (FIL), and DoubleZero (ZZ).
Altogether, the market capitalization of all cryptocurrencies plunged to $3.7 trillion, while total liquidations jumped to over $20 billion during the weekend. This article explores the main reasons why the crypto market crash happened and whether Bitcoin and altcoins will go back up soon.
Why the crypto crash happened
The crypto market crash happened as investors reacted to the new geopolitical issues between the US and China. These tensions have been boiling in the past few weeks as China has announced some major news targeting the US.
For example, China has not imported any soybeans from the US in this season, leading to a substantial increase in inventories. Donald Trump has pledged to use some of the tariff revenue to help out farmers, many who are in states that he won.
China has also asked its technology companies to avoid using American chips, especially those made by Nvidia. Beijing hopes that these countermeasures will help to supercharge the domestic chip industry.
Further, the country announced measures to limit rare earth metal exports to the United States and other countries, and new tariffs on ships docking from the country.
Therefore, Donald Trump announced major tariffs on goods from China, leading to a sense of fear among investors, which led to a stock and crypto market crash. The Fear and Greed Index moved to the fear zone as investors sold in panic.
Will Bitcoin and other crypto go back up?
The question among investors is whether the crypto market will go back up in the coming days.
A closer look shows that most coins have already surged from their lowest level last week. Bitcoin price has jumped to $111,200 from a low of $108,500 last week.
Zcash price has continued its relentless bull run that has pushed it from a low of $35 this month to $273 today. Other top coins that have rebounded are Story, MYX Finance, VeChain, and Morpho.
The risk, however, is that the ongoing crypto market rebound is part of a dead-cat bounce, a situation where an asset in a freefall bounces back temporarily.
Some potential catalysts may push the crypto market back up again. For example, industry may rebound because of the common phrase ‘TACO’, which means that Trump Always Chickens Out. As with the past, there is a likelihood that he will end the new tariffs by opting to negotiate with China.
Also, the crypto and stock market will likely recover towards the upcoming meeting with Xi Jinping at the APEC meeting in South Korea. Such developments will be bullish for the stock and crypto market as they did earlier this year.
Additionally, the crypto market always bounces back after a major crash as we experienced earlier this year. Bitcoin plummeted after Donald Trump’s Liberation Day in April and then jumped to a record high in the following month.
The other main reason why the crypto market may bounce back is that the Federal Reserve will likely intensify its intensiffy its interest rate cuts in the coming meetings, which will boost risky assets like cryptocurrencies.
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