Here’s why the crypto market is crashing today (May 28)

The crypto market is crashing today, with Bitcoin and top coins being in the red. Bitcoin price dropped below the crucial support level of $73,000, while Ethereum plunged below $2,000. Other top laggards in the crypto industry were tokens like Humanity, Render, Ondo, Virtuals Protocol, Worldcoin, and Celestia.

Crypto market crash triggered by US-Iran tensions

The main reason behind the ongoing crypto market crash is the rising possibility that the US and Iran will go back to war as talks stall. As we reported earlier, the US military launched new strikes against key Iranian targets, with CENTCOM officials describing them as purely defensive. 

These strikes came two days after the US military launched similar attacks and claimed self-defense. Chances are that the US is using these limited strikes to push Iranians to the negotiating table.

Still, chances are that this strategy will backfire as Iran has vowed to retaliate against the US. A prolonged retaliation strategy will likely bring the two countries back to war.

In a statement on Wednesday, Trump insisted that he was not afraid of extending the Iran war. That is a sign that he has already resigned to the fact that Republicans will lose the coming midterm elections.

These attacks came at a time when the Iranians and the US are negotiating for a 60-day ceasefire. That ceasefire will likely lead to lower oil prices and inflation, pushing the Fed to avoid hiking interest rates this year.

Strong Bitcoin and Ethereum ETF outflows

The crypto market is accelerating because of the ongoing spot Bitcoin ETF outflows. Data shows that these funds lost a whopping $733 million on Wednesday, the biggest single-day dump in months.

Spot Bitcoin ETFs have now shed over $2 billion this month, after adding $2.9 billion and $1.32 billion in the previous two months consecutively. The same happened in the Ethereum market, where these ETFs shed over $67 million in assets on Wednesday. They have had outflows in the last 11 consecutive days, bringing the monthly outflows to $401 million.

These numbers mean that demand for Bitcoin and Ethereum is waning in Wall Street. One potential reason is that these investors are rotating from crypto to the fast-growing stock market.

Data shows that the stock market has continued its rally this year, with the Nasdaq 100 and Dow Jones trading at their all-time highs. Most notably, AI stocks like Micron and Broadcom have continued their bull run, with the former achieving a $1 trillion market capitalization. This surge is being driven by the upcoming OpenAI IPO.

Investors are also likely rotating to space stocks, with companies like Rocket Lab, Planet Labs, and Intuitive Machines soaring by triple digits this year. These stocks are soaring as investors anticipate the upcoming SpaceX IPO. 

Technical breakdown is contributing to the cryptocurrency market crash

BTC price chart | Source: TradingView

A closer look at the Bitcoin and Ethereum charts shows that the two have formed highly bearish chart patterns. For example, as the chart above shows, Bitcoin formed a rising wedge pattern, a common bearish reversal sign in technical analysis. This pattern is made up of two ascending and converging trendlines. 

Bitcoin has also slumped below the 50-day and 100-day moving averages. That is a sign that bears have prevailed, which will lead to more downside across Bitcoin and all tokens.