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A crypto crash is underway even as the US stock market surged to a record high. Bitcoin and most altcoins, such as Dogecoin (DOGE), Sui (SUI), and MYX Finance (MYX), were among the top laggards.
The market capitalization of all cryptocurrencies plunged to about $4 trillion, down from over $4.1 trillion. This article highlights some of the top reasons why the crypto market is going down.
Why a Crypto Crash is Happening: Options Expiry
The ongoing crypto crash is happening as investors react to a $4.3 billion options expiry on Deribit.
Data shows that Bitcoin options worth about $3.5 billion and Ethereum valued at over $800 million will expire today.
For Bitcoin, the maximum pain was about $114,000, down from the current $116,00. Ethereum’s maximum pain was about $4,500, slightly higher than the current price.
Historically, cryptocurrencies tend to drop before and after a huge options expiry event as investors sell some of their positions.
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The other major reasons why the crypto crash is happening is that investors are booking profits after most of them went parabolic.
A closer look at the crash shows that the best-performers during the week were among the top laggards.
For example, MYX Finance moved from nowhere to becoming the best-performing coin in which some investors attributed to manipulation. It jumped by over 1,800% between its lowest and highest levels this month.
Similarly, Dogecoin jumped ahead of the Rex-Osprey Dogecoin ETF (DOJE) and then slipped after its launch as investors booked profits and sold the news. Some of the other tokens that surged during the week and then plunged on Friday were the likes of Worldcoin, Mantle, and Pump.
A few technical factors explain why the crypto crash is happening. The most notable one, which is shown in the chart above, is that the Bitcoin price has formed a rising wedge and a bearish divergence pattern on the daily chart.
A rising wedge pattern happens when an asset forms two ascending and converging trendlines. A breakdown happens when the two lines are about to converge. The coin has also formed a bearish divergence pattern as the MACD and the Relative Strength Index have moved downwards.
MYX Finance also formed a giant double-top pattern as it surged during the week. It also became highly overbought as the RSI and other oscillators soared.
The other reason why the crypto crash is happening is that investors are selling the news after the Federal Reserve delivered its first interest rate cut of the year.
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