The cryptocurrency market’s decline accelerated on Saturday as futures open interest fell and liquidations soared to more than $1.6 billion, the highest level in weeks. This article explores whether the crypto industry will recover as the sell-off intensifies.
Summary
- The cryptocurrency market decline intensified on Saturday.
- The decline continued as liquidations rose to more than $1.6 trillion.
- The crisis is likely to continue and then recover later this year.
Why the cryptocurrency market crash is happening
The fall of the cryptocurrency market is being caused by a few factors. One of the most notable is the fact that the odds of Donald Trump attacking Iran soon continued to increase on Polymarket. These odds have now increased to over 80%, with their navy approaching iran.
Bitcoin (btc) and other altcoins are falling 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 has continued to decline.
The cryptocurrency crash is also occurring as memories of the October 10 sell-off event linger. That event occurred after Trump warned of possible tariffs against China. Since then, leverage in the crypto industry has largely disappeared, with futures open interest going from $255 billion to $113 billion.
The other reasons for the current crypto crash is that Trump appointed Kevin Warshan inflation hawk as the next chairman of the Federal Reserve. Market participants expected BlackRock’s Rick Rieder to be mentioned.
Will the cryptocurrency market recover?
The question among investors is whether the cryptocurrency market will recover in the short term. Tom Lee, the popular analyst and president of BitMine, believes that the current cryptocurrency crash will end soon. He noted that, historically, Bitcoin always emerges from big drops.
For example, Bitcoin fell more than 30% between its highest point in March and its lowest point in August. It then recovered and hit a record high in November. It also fell below $16,000 in December 2022 and then recovered.
There are some potential catalysts for the cryptocurrency market to eventually recover. For example, the US dollar index continues to decline, often leading to increased demand for risk assets. Additionally, the Federal Reserve is likely to resume interest rate cuts soon.
Furthermore, there are signs that Bitcoin and major altcoins have become bargains as their MVRV indicators have plummeted.
Therefore, the most likely scenario is that the crypto crash continues and then recovers later this year.
