Why Is Crypto Crashing Right Now?

In his X Post, Michaël van de Poppe, a renowned crypto expert and trader, shares his concerns about the current state of the crypto market and outlines what needs to happen to change the momentum. He highlighted a significant capitulation phase, a term used to describe a heavy correction with double-digit losses over a short period. Ethereum dropped to a six-month low, Bitcoin fell to $58,000, and altcoins hit new bear market lows. 

The Downturn: What’s Happening?

Van de Poppe highlights that the crypto market has shown significant weakness, especially in August and September, which are historically bad months for crypto. While Coinbase reported positive earnings, retail activity remains down by 75-80% compared to 2021. This decline raises questions about whether we are truly in a bull market. Bitcoin dominance continues to rise, indicating that the broader market isn’t as bullish as Bitcoin.

Reasons for Ethereum’s Weakness

Ethereum’s weakness lies in significant outflows from Grayscale’s Trust, with $400 million on the first day of the Ethereum ETF listing, which decreased to $60 million by last Friday. Jump Trading also contributed by offloading $500 million in Ethereum, starting two days after the ETF listing and continuing through the weekend. Van de Poppe notes that Ethereum is approaching crucial support levels, with the CME gap up to $63,000, possibly indicating a potential rebound.

Capitulation Phase- Why It Matters

He believes the market is in a capitulation phase, similar to past downturns, and expects a recovery driven by events like the Ethereum ETF. He advises watching Bitcoin dominance and sees the current period as a buying opportunity. According to Van de Poppe, Capitulation often signals an approaching market bottom with a lucrative entry point for altcoin investment. 

Key Factors Behind the Decline

• Political Developments: Kamala Harris’s gaining votes over Trump is causing fear in crypto investors. 
• Geopolitical Conflicts: Intensifying Israel-Gaza conflict, especially after the killing of a Hamas leader in Iran, such war-like situations are tumbling the global economy. 
• Economic Data: Poor labor market data increased calls for rate cuts, raising recession fears. Many relate this to the crypto downturn or a severe crash expected in September. 

What can reverse this?

Increased global liquidity, particularly from China and Japan, is expected to boost the market and turn the bear market into a bull market. China’s rising liquidity and the US’s expanding balance sheet are positive signs for Bitcoin and altcoins.

Key Indicators to Watch

Watch for positive flows in Bitcoin and Ethereum ETFs, which could drive market surges. A market rally may follow if gold hits new highs and the dollar/yields decline. Key levels to monitor include Ethereum holding above 0.044-0.045 BTC and Bitcoin maintaining the $60-61K level for stability and potential new highs.

In conclusion, Van de Poppe suggests that the market’s heavy correction might be nearing its end, with critical support levels and indicators hinting at a potential turnaround.