Why Is The Crypto Market Plunging Today?

The cryptocurrency market capitalization fell by 2.2% this Tuesday, reaching $2.34 trillion, amid geopolitical tensions and electoral uncertainties in the United States. Bitcoin, the queen of cryptos, dropped below $67,000, dragging the entire market into its downward spiral.

Electoral uncertainty weighs on the crypto market

On Wall Street this Tuesday morning, crypto investors massively sold their positions, worried about the uncertain outcome of the U.S. presidential election.

The tight race between former President Trump (63.5% chance according to Polymarket) and Vice President Harris (36.2%) is causing widespread risk aversion. Large investment funds are temporarily shunning volatile assets like cryptos in favor of traditional safe havens.

The differing positions of the candidates on the regulation of the sector fuel this nervousness. Trump openly shows his support for cryptos, while Harris maintains an ambiguous position despite a few encouraging statements. Faced with these regulatory uncertainties, institutional investors are massively reducing their exposure to the crypto market.

Trading volumes on major platforms have exploded, reaching $157 billion in 24 hours, witnessing a widespread panic selling movement.

The Fed douses hopes for a monetary pivot

The second factor weighing on prices comes from the monetary front. The latest statements from Federal Reserve members suggest a prolonged maintenance of interest rates at their current level, contrary to market expectations that anticipated cuts as early as spring.

This outlook mechanically strengthens the dollar and bond yields, two variables traditionally negatively correlated with crypto assets. The 10-year yield thus passed 4.5% this morning, a high not seen since 2007.

Crypto fund managers are therefore adjusting their positions in light of this new paradigm of persistently high rates, favoring caution in the short term.

In summary, the current correction illustrates the market’s persistent sensitivity to traditional macroeconomic and political factors. Only a clarification of the electoral landscape or a change in tone from the Fed could reverse this downward dynamic in the coming weeks.