A crypto crash is going on, leading to substantial losses and liquidations among bullish investors. Bitcoin (BTC) price has dropped from this week’s high of $84,500 to $81,000, while Ethereum (ETH) is stuck below $2,000.
Other popular altcoins have also plunged. Pepe (PEPE), the third-biggest meme coin, has crashed by over 75% from its highest level last December. This crash has led to a $7 billion wipeout as the market cap has dropped below $3 billion.
The price of Cardano (ADA) has moved to $0.70, down from last year’s high of $1.32. Stellar (XLM) and Solana (SOL) have also plunged in the past few weeks. Altogether, the ongoing crypto crash has led to a $1 trillion wipeout.
Pepe, ADA, XLM, Solana Crashes As Fear and Greed Index Retreats
The first reason why these tokens are crashing is that investors are fearful. Data shows that the crypto fear and greed index has dropped to the fear zone of 25, while the altcoin season index has moved to 20.
The crypto market tends to underperform when investors are fearful since buyers often remain on the sidelines. The opposite occurs when the fear and greed index rises, attracting animal spirits. This often results in fear of missing out (FOMO).
This fear is due to the ongoing trade war between the US and other countries. Donald Trump has implemented tariffs on countries like Canada, Mexico, and China. As such, investors believe that the economy may sink into a recession. This explains why the stock market crash is happening, with the Nasdaq 100 being in a correction.
Crypto Crash Happens Ahead of the Federal Reserve Decision
The ongoing crypto crash is also happening as investors wait for the second Federal Reserve meeting of the year.
This meeting is expected not to bring immediate changes, as the Fed will likely leave interest rates between 4.25% and 4.50%.
The dot plot and Jerome Powell’s statement will be the main catalyst for altcoins like XLM, ADA, Pepe, and Solana.
A dot plot is a document that forecasts the possible timing of interest rate cuts or hikes. Signs that the bank will deliver more than three cuts this year will be a bullish catalyst for these altcoins. In the last two meetings, officials have insisted that they will not be in a hurry to slash rates. The recent tariffs and recession risks may push them to change their minds.
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