What Caused the Global Crypto Market Crash Today?

The broader crypto market experienced a sharp decline from April 30 through to the first day of May. Investors are worried about the huge loss in numbers, one that has not been seen in almost 3 months. According to data from CoinMarketCap, the global crypto market cap has crashed by 5.64% to $2.14 trillion in the last 24 hours.

Since the beginning of 2024, the crypto market has had a bullish momentum, catalyzed by the approval of spot Bitcoin ETF by the U.S. Securities and Exchange Commission. Additionally, the positive sentiment was sustained by the anticipation of the recently completed Bitcoin halving. However, it seems like the momentum has come to an end as prices took a nosedive, beginning the month of May in ‘bloodbath.’

At the time of writing, Bitcoin, the flagship cryptocurrency has plummeted by 7%, trading below the $60,000 mark. Per CMC data, BTC is changing hands at $57,636 with a live market cap of $1.13 trillion. Similarly, Ethereum, the second-largest cryptocurrency by market cap has declined by a notable 5% $2,892 in the last 24 hours.

Other popular cryptocurrencies including XRP, Solana (SOL), and BNB have lost 1.47%, 6.19%, and 5.13% of their value respectively over the last day. The tokens that took the worst hit among the top ten cryptocurrencies include Dogecoin (DOGE), and Toncoin (TON) with 9.12% and 8.99% respectively loss respectively.

As the overall outlook seems like the downturn is not reversing soon, investors are curious about the reasons behind the trend. Let us take a look.

Why is the Crypto Market Down Today?

Bitcoin ETFs Saturation

Earlier this year, the crypto market, led by Bitcoin experienced a rally following the approval of spot ETF by the United States regulatory watchdogs. As a result, billions of dollars were injected into the market from institutional investors causing an upward swing in the price of the asset. However, crossing to Asia, the Bitcoin and Ethereum Spot ETF approval in Hong Kong did not generate the same buzz as it did in the U.S. On the opening day, only $8.5 million in Bitcoin ETF trading and $2.5 billion in Ethereum ETF trading was recorded. This reduction might signify a loss of interest in crypto exchange-traded funds.

Sentencing of Changpeng Zhao

The founder and former CEO of Binance, Changpeng ‘CZ’ Zhao was sentenced to 4 months in prison on April 30 by Seattle-based U.S. District Judge, Richard Jones. Following the event, the crypto market plunged by 5.12% to $2.21 trillion, indicating the level of attention the court case gained. CZ pleaded guilty to one count of violating the Bank Secrecy Act in November 2023 hence the sentence. Even though the prosecutors had asked for a three-year sentence, the embattled founder was given a slap on the wrist with a lenient sentence.

Momentum Fade

What is alarming cryptocurrency investors more is that the catalyst for the previous six months’ surge has suddenly subsided. After adopting a “risk on” mentality in the middle of 2023, investors are now dealing with a slowing economy and the fact that interest rates will be higher for a longer period than initially anticipated.

Bitcoin and other cryptocurrencies are pictured as a hedge against inflation by investors, however, the reality is that cryptocurrencies are very volatile assets and their value can rise and drop sharply at any time. We may have witnessed a peak in cryptocurrency values for the time being unless there is a change in the economy’s growth rate or investors’ willingness to take on more risk.