A crypto crash is happening today, with Bitcoin and top altcoins like Dogecoin (DOGE), Pi Network (PI), Cardano (ADA), Aster (ASTER), and Ondo (ONDO) falling by over 5%. The market cap of all tokens dropped by over 4% in the last 24 hours to $2.93 trillion. This article explores why the crypto market crash is happening today.
Crypto crash is happening amid risk-off sentiment
One main reason why the crypto market is happening is that investors have embraced a risk-off sentiment as the artificial intelligence (AI) jitters continued.
These jitters explain why top indices like the Dow Jones, S&P 500, and Nasdaq 100 continued to drop on Monday. The Dow Jones fell by 105 points, while the S&P 500 and Nasdaq 100 dropped by 40 and 20 basis points, respectively.
Top AI companies like Nvidia, Broadcom, CoreWeave, and Oracle continued their downtrend, which has now erased over $1.5 trillion in value in the past few weeks alone.
There are risks that the AI bubble is bursting, a move that would have an impact across other asset classes like cryptocurrencies and bonds because of the correlation that exists among them.
Jitters in the AI industry accelerated last week when Oracle published its results. While its revenue and RPO growth continued growing, its negative free cash flow and elevated debt levels raised concerns among investors.
Oracle’s credit profile continues to worsen. The company’s CDS spread (cost of insuring against default) has climbed to 151bps, its highest level since 2009 – a warning sign not just for Oracle but for the broader AI sector. Markets are now pricing in a probability of default of
US macro data ahead
The other main reason why the crypto market is crashing today is that investors are waiting for the upcoming macro data from the United States.
The Bureau of Labor Statistics (BLS) will publish the October non-farm payrolls (NFP) report later on Tuesday and the latest consumer price index (CPI) report on Thursday this week.
Economists expect the upcoming report to show that the economy added 55k jobs in October, much lower than the 110k it created in the previous month. The labor report will likely be affected by government employees who took Donald Trump’s voluntary retirement, which kicked off on September 30.
Meanwhile, data compiled by Trading Economics is expected to show that the headline and Consumer Price Index (CPI) rose to 3% in November.
These numbers will come a week after the Federal Reserve delivered a 0.25% rate cut and hinted that it would cut once in 2026. The pace of cuts will depend on the upcoming data. For example, the bank may deliver more cuts in 2026 if inflation shows signs of coming down.
Bank of Japan interest rate decision
The crypto market crash is happening as investors wait for the upcoming Bank of Japan interest rate decision on Friday this week.
Economists polled by Reuters and Polymarket data shows that the bank will hike interest rates by 0.25% to a multi-decade high of 0.75%.
Bank of Japan is set to hike interest rates by 25bps on December 19 The last 3 times BoJ hiked rates, Bitcoin dumped by over 20% March 2024 → -27% July 2024 → -30% January 2025 → -31% We already saw a 7% dump last week as investors tried to front-run the dump. However,
The bank’s goal for hiking interest rates is to combat the elevated consumer inflation, which has remained at 3% in the past few months. This inflation may continue rising in the coming months as the impact of the new stimulus package requested by Sanae Takaichi flows through the economy.
Data shows that cryptocurrencies normally drop when the BoJ hikes interest rates because of the perception that the Japanese borrowed cheaply and invested in assets. As rates rise, these investors do the opposite and sell these assets as part of their winding down of the carry trade.
Falling futures open interest
The crypto crash is happening as investors continue to reduce their leverage in the crypto industry, which soared during this year’s bull run.
CoinGlass data shows that the futures open interest has tumbled to $129 billion, down by 4% in the last 24 hours. It dropped from the October high of over $255 billion. A drop in open interest is risky for the crypto market as it reduces the demand.
Meanwhile, liquidations soared by 109% in the last 24 hours, with nearly 200k traders being liquidated. Ethereum, Bitcoin, Solana, and XRP positions worth over $233 million, $180 million, $37 million, and $15.6 million were liquidated in the last 24 hours.
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