It was a sea of red in the cryptocurrency industry as most coins crashed. Bitcoin plunged to $65,000, triggering a major sell-off in the industry. Meme coins, which are among the best-performing cryptocurrencies this year, led the sell-off.
Floki, Bonk, and Pepe prices dived
Dogwifhat (WIF), the highly popular meme coin plunged by more than 23% in the past 24 hours. It was followed by other tokens like Bonk, Pepe, and Floki Inu, which all crashed by over 20% in the same period. This sell-off happened in an extremely high volume environment.
The ongoing sell-off started during the weekend when Bitcoin retreated to below $65,00 briefly. This plunge triggered most altcoins to sell off. But they all bounced back on Monday as Bitcoin attempted to bounce back, soaring to a high of $68,000.
Therefore, this sell-off is happening as Monday’s rebound suggested that it was a dead cat bounce. For starters, a dead cat bounce is a situation where an asset falls sharply and then rebounds briefly before continuing the downward trend,
There are two main reasons why these altcoins are falling. First, the crash is mostly because of profit-taking since most coins were up sharply in the past few weeks. Bitcoin had managed to surge from less than $40,000 in January to over $73,000.
Similarly, most altcoins like Floki, Book of Meme, Pepe, and Bonk had also surged by more than 200% in the same period. In most cases, these parabolic moves are usually followed by a sharp decline of an asset’s price.
Federal Reserve decision ahead
The other reason for the crash is the Federal Reserve, which will start its two-day meeting on Tuesday. It will then deliver its second interest rate decision of the year on Wednesday.
This meeting comes at a time when inflation has remained highly sticky. The headline and core Consumer Price Index (CPI) rose to 3.1% and 3.8% in February, much higher than the Fed’s target of 2.0%.
Therefore, most analysts believe that the Fed will signal that it will not start cutting interest rates as earlier as expected. The market has a less than 50% chance that the rate cut will start in June this year.
The actions of the Fed are important for all assets, including cryptocurrencies. In most cases, these tokens do well when the Fed has a dovish sentiment.
So, the question is whether the Floki, Pepe, and Bonk bull run has ended. I believe that the bull run is not yet over. Instead, the industry is going through a temporary shake-out and that most of these coins will resume the bullish trend. It is unclear how long the shakeout will continue.
