On Thursday morning, the crypto industry was in a sea of red as Bitcoin tumbled below $63,000 and Ethereum dropped below $3,200. The total market cap of all cryptocurrencies dropped by over 3.3% to $2.3 trillion, while the crypto fear and greed index retreated to a neutral point of 57.
Meme coins lead the sell-off
Meme coins were the worst performers in this sell-off. Popcat prices tumbled by over 12%, while Mog Coin, Dogwifhat, Book of Meme, and Bonk fell by more than 10%. These tokens have slipped by over 15% from their highest points this week.
This performance is a harsh reversal from Monday when Bitcoin rose to $70,000 for the first time in over a month. In most cases, meme coins tend to show more extreme moves than Bitcoin. When Bitcoin rises, these coins jump at a faster rate, and vice versa.
There are three potential catalysts for this sell-off. First, meme coins are falling because of the ongoing tensions in the Middle East, where experts warn of a prolonged war. Turkey has warned that it will intervene if Israel launches a full attack on Lebanon. Iran has also vowed to retaliate after Israel killed the head of Hamas on its soil.
Occasionally, cryptocurrency prices drop sharply when there are major geopolitical issues.
Federal Reserve decision
Second, their crash happened as investors sold the Federal Reserve news. In its monetary policy decision, the Fed decided to leave interest rates unchanged, as was widely expected. The bank then hinted that it was watching its dual mandate, signaling it would start cutting rates soon.
The Fed’s dual mandate is to ensure that the US has stable inflation and a low unemployment rate. While inflation has continued falling in the last few months, the unemployment rate has risen to its highest point since 2021. Therefore, in his statement, Jerome Powell said the door for a rate cut in September was open.
The Fed’s decision was mostly good for Bitcoin and other risk assets. Therefore, these assets dropped sharply as investors sold the news since it aligned with expectations. The final reason is that a Bitcoin options expiry is coming on August 2nd.
Data by Deribit shows that this expiry will be worth over $2.3 billion. In most cases, Bitcoin’s price drops ahead of an important options expiry.
