Today, the crypto market is experiencing a significant crisis.
In particular, the fear index has dropped to levels not seen even when it fell below $80,000 in April, and which haven’t been observed since the bear-market of 2022.
Indeed, it seems that a bear-market has begun, but the situation remains quite unusual.
Summary
Today’s Crisis in the Crypto Market
Dominating the crypto markets is always Bitcoin.
In the last ten days, there has been an almost continuous decline that seems poised to bring the price back below $80,000.
The collapse began with the breach of the support at $105,000, but continued almost uninterruptedly with the breach of many other supports.
In fact, two days later the $100,000 level was breached, and the following day the $98,000 level was also broken.
The main issue occurred on Monday with the break of $92,000, followed the next day by the break of $90,000.
This was followed by three more drops, one the day before yesterday, one yesterday, and one today.
This is therefore a crisis that has been ongoing for several days and seems to have no end.
The First Positive Signal
Yesterday, however, a small initial positive signal emerged in the American markets.
The MOVE index, which measures the volatility of the US bond market, has significantly dropped for the first time after twelve days of rising.
Generally, an upward MOVE is a bad signal for the crypto markets, whereas conversely, a downward MOVE is a positive signal.
The significant rise of the MOVE index began on November 5, the day after Bitcoin first broke the support set at $105,000. After a brief pause, a small rally of the MOVE index started on November 7, which, however, did not have immediate effects on Bitcoin.
The key point was Wednesday the 12th, when the value of the MOVE index surpassed the 100-day moving average. The following day, Bitcoin’s price broke the $100,000 support.
Well, this index reached its local peak the day before yesterday, while yesterday it suddenly fell below the 100-day moving average.
It is therefore possible that with the reopening of the American markets today, there might be a sort of truce regarding the collapse of the crypto markets.
The Primary Reason for the Crypto Market Crash
Today’s situation is unfortunately plagued by two problems that are compounding.
Neither directly concerns Bitcoin or the crypto market, but both are having a significant impact on the price of Bitcoin, and consequently on the crypto markets as well.
The first is the minor liquidity crisis caused in the American markets by the shutdown.
Although the US government shutdown ended more than a week ago, the liquidity crisis it generated is far from over.
Since the first of October, $153 billion unspent has accumulated in US government accounts, due to the fact that the government could not spend money because of the shutdown. In theory, starting from last Thursday, November 13, the government should have begun spending it, but until the day before yesterday, it had only spent 16, which is just over 10%.
It will likely take weeks before the situation can return to normal from this perspective. Until then, the minor liquidity crisis in the American markets will continue, although it will gradually diminish week by week.
The Second Cause
To all this, starting from yesterday, a second cause was added. The combination of these two causes has literally caused the crypto markets to crash, sending Bitcoin into a bear-market.
The problem is that interest rates in the USA are too high, and the Fed should cut them.
If there hadn’t been the shutdown, the Fed probably wouldn’t have had much trouble cutting them, but due to the longest shutdown in the entire history of the USA (something unprecedented), the Fed currently lacks the data to make a decision.
The American central bank, in fact, makes its decisions based on data; therefore, in the absence of sufficient data, it might not be able to make any decision.
Yesterday, on Polymarket, the odds that the Fed will not cut rates in December soared well above 60%, indicating that bettors currently see this outcome as the most likely.
However, there is still the possibility that the Fed might have those data even if the government agencies responsible for their collection and publication have been shut down and were unable to produce them.
All this, combined with the fact that the Dollar Index might also start to weaken in the coming days, theoretically makes a rebound in the crypto markets possible, although it may not be immediate.
In the end, although Bitcoin has indeed entered a bear-market, it should also be considered that this could be an anomalous and shorter bear-market compared to those in the past (perhaps even much shorter).
