Both cryptocurrency and stock markets are facing significant declines. This unexpected downturn has fueled speculation about its causes. However, multiple factors appear to be at play.
Crypto Prices Dropped
Despite a strong start to the week, the cryptocurrency market has plunged in the past 24 hours. The total market capitalization fell by 2.9% to $2.76 trillion.
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All major cryptocurrencies turned red, with Ethereum (ETH), XRP, and Dogecoin (DOGE) leading the losses, each dropping more than 6%. Bitcoin also slipped over 2% on Friday, trading slightly above $85,000 at the time of writing.
In the past 24 hours, $418 million in leveraged positions, including $354 million in long positions, were liquidated. Ethereum took the hardest hit, with losses nearing $140 million, according to CoinGlass data.
Implementation of New U.S. Tariffs
One widely discussed theory points to growing concerns over global economic conditions, which have already triggered declines across financial markets.
Following U.S. President Donald Trump’s decision to impose a 25% tariff on imported cars and auto parts, European Union and Canadian partners have warned of retaliatory measures against U.S. consumers.
Fears of a trade war escalation have rattled financial markets. Investors worry that worsening trade tensions could dampen risk appetite, leading to a pullback in speculative assets like cryptocurrencies.
Stock futures and automaker shares fluctuated in early Friday trading, reflecting market uncertainty.
At the same time, gold and bond prices rose as investors sought safer assets.
Anticipation of Inflation Data
Investors are closely watching the upcoming release of the U.S. Personal Consumption Expenditure (PCE) data, expected to show increased consumer spending and a rise in core PCE prices to 2.7%.
This has heightened concerns about inflationary pressures and the Federal Reserve’s potential monetary policy moves.
Expiration of Crypto Options
Over $14 billion in Bitcoin and Ethereum options are set to expire today, which could add further volatility to the market.
According to a post by Greeks.live option traders on X, 39,000 BTC options worth $12.1 billion and 301,000 ETH options worth $2.13 billion are expiring. The maximum pain points stand at around $85,000 for BTC and $2,400 for ETH.
While slightly more bullish (Call) bets exist compared to bearish (Put) ones, the large expiry volume is expected to increase volatility, particularly if BTC and ETH trade below these pain points.
“Cryptocurrencies are currently lacking new incoming funds and new narratives, investor sentiment is starting to become sluggish, with no signs of reversal still visible in the short term after quarterly delivery, and large double selling is becoming more frequent,” says Greeks.live.
Why This Matters
The crypto market is facing multiple challenges. With macroeconomic pressures weighing on investor sentiment, volatility will likely persist in the coming days.
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