Why is Bitcoin crashing today? The largest cryptocurrency in the world has fallen below $27,500 and it continues to move lower. Other virtual currencies have fallen as well, pushing the entire crypto market capitalization down close to 10% in the last 24 hours.
But what happened that Bitcoin (BTC) and digital currencies continue moving lower? We give you three reasons why Bitcoin is crashing today.
Why is Bitcoin Crashing Today?
Bitcoin has lost 6.2% of its value in the last 24 hours moving below $27,500 reaching the lowest point since May 12, 2022, when the market reacted to Terra’s (LUNA) crash.
CPI Hits 8.6%
One of the reasons could be related to the recent information about the Consumer Price Index (CPI), which is one of the most important measures analysed by the Federal Reserve (FED) in order to make a decision about interest rates.
With the CPI releasing a value of 8.6% inflation might not have yet peaked, which could push the FED to increase rates in June and July. This could create an outflow of funds from risk assets that would move to fixed income and relatively stable and low-risk assets.
Therefore, one of the reasons why Bitcoin is crashing today is related to the expectations of what the FED could do after the most recent CPI result. It is also worth pointing out that this sell-off can be also seen in stocks and traditional financial markets, it is not something exclusive to Bitcoin.
Ethereum Delays its Network Upgrade
Despite the fact that the sell-off in Bitcoin has also affected other virtual currencies, there is something that has affected Ethereum more than other digital currencies. We are talking about the decision of Ethereum developers to delay one of the most awaited upgrades for ETH since this blockchain network was released to the market.
We are talking about the delay in the official release of the Proof-of-Stake (PoS) Ethereum network. As of today, Ethereum relies on a Proof-of-Work (PoW) consensus algorithm. However, it should soon change to a PoS.
Developers decided to delay to so-called “difficulty bomb” that would make it almost impossible for miners to protect the Ethereum network and process transactions. This gives more time to developers to release the new Ethereum that would rely on a PoS consensus algorithm.
Crypto Fear and Greed Index Stays in the “Extreme Fear” Region
Finally, these things and the general sentiment in the economy have pushed the Bitcoin Fear & Greed Index to Extreme Fear. It has been in this way for almost a month. Even when the Fear & Greed Index improved compared to yesterday’s value, it is still in an Extreme Fear situation.
Therefore, when fear reigns in the market it might be required some time to leave that behind and move towards a bullish and extremely optimistic situation. The market has to change and this might take some time. Meanwhile, Bitcoin continues to be traded below $27,500 and it could move down even further.