Key Points
- Cryptocurrency prices, including Bitcoin and altcoins, experienced a significant drop on Tuesday.
- Three potential catalysts for the crypto crash include Trump’s tariff proposal, mixed U.S. stock performance, and a Bitcoin sell signal.
Cryptocurrency values experienced a sharp downfall on Tuesday, continuing a downward trend that started in November of the previous year.
Bitcoin (BTC), the leading digital currency, fell under the crucial support level of $89,220, dipping to an intraday low of about $86,000.
Altcoins Bear the Brunt
Altcoins were hit even harder, with Jasmy Coin (JASMY) falling to $0.01683, its lowest since November 5, and 72% below its 2024 peak. Meme coins Pepe (PEPE) and Dogecoin (DOGE) also fell by over 8%, causing the total market capitalization of meme coins tracked by CoinGecko to fall below $60 billion.
Possible Catalysts for the Crypto Crash
There are three potential triggers for the ongoing crypto crash.
The first catalyst is the market’s negative reaction to former President Donald Trump’s plan to impose tariffs on Canadian and Mexican goods beginning in March. These tariffs were delayed by a month for negotiations on drug policies and immigration. A 25% tariff on U.S. imports could potentially result in higher inflation and slower economic growth, pressuring the Federal Reserve to take action. The Fed has already indicated that it will only cut interest rates when inflation is closer to its 2% target. However, recent economic data suggests that both headline and core inflation are deviating further from this target.
The second catalyst is the decline in Bitcoin and other crypto prices as U.S. stocks showed mixed performance. The Nasdaq 100 index opened lower by around 0.55% while the S&P 500 index was nearly flat. The Dow was up 0.36%. The tech sector’s weakness is likely due to market anticipation of NVIDIA’s fourth-quarter earnings, which are expected to provide further insight into the artificial intelligence sector.
The third catalyst is the further fall in Bitcoin and other crypto prices, including Pepe, Dogecoin, and Jasmy, after BTC indicated a sell signal on the daily chart. The daily chart shows that Bitcoin formed a double-top pattern at $108,438 in December and January. It has now broken below the neckline at $89,136, confirming a bearish outlook. It has also moved below the 50-day and 100-day moving averages. A continued sell-off could push Bitcoin toward the next key support level at $73,725, the highest swing in March last year, an 18% drop from current levels. Such a move would likely trigger further declines across the altcoin market.
However, there is still a possibility that this crash is a false breakdown, similar to what occurred on Jan. 13, which eventually led to a strong rebound.
