Here’s why the crypto market is crashing and liquidations are rising

The crypto market is crashing today, with Bitcoin and most altcoins remaining in a bear market. After rising to $82,000 in May, Bitcoin price crashed to $66,000 on Wednesday. Ethereum remains below $2,000, while the market capitalization of all tokens fell by 4.2% to $2.3 trillion. This article explores the top reasons behind the crypto crash and the surge in liquidations.

Crypto market crashing amid the ongoing AI boom

The main reason why the crypto market is going down is that investors have turned to the stock market amid the ongoing artificial intelligence boom in the United States.

Some crypto investors have seen the performance of the stock market and decided to move there. Besides, while Bitcoin is down for the year, top AI stocks like Sandisk, Micron, Intel, and Seagate have jumped by triple digits. 

Similarly, the Nasdaq 100 Index has already jumped by 20% this year, while the S&P 500 Index is up by 10%. Other top AI-focused ETFs are doing well, with the newly launched DRAM more than doubling.

A good example of all this is the performance of exchange-traded funds (ETFs). Data shows that stocks ETFs have added billions of dollars this year, with Vanguard’s VOO nearing the $1 trillion AUM mark. DRAM, which was launched in April, has gained over $15 billion assets.

In contrast, the biggest crypto ETFs have shed substantial assets this year. Bitcoin ETFs have shed over $3 billion in assets since the second week of May this year. Ethereum funds have had outflows in all months other than April this year, losing over $1 billion in assets. 

To be clear: while the crypto market crash has deepened this year, AI coins have soared. The most notable ones are coins like Humanity Protocol, Worldcoin, Venice Token, and Near Protocol. 

Technicals have contributed to the crypto crash

The first point is the most important one in terms of the ongoing crypto market weakness this year. The other main reason is technicals, which have had a role to play.

For example, the daily chart below shows that the Bitcoin price formed a rising wedge pattern. This pattern is made up of two ascending and converging trendlines. A bearish breakout normally happens when the two lines are nearing their convergence. 

Bitcoin price chart | Source: TradingView

Ethereum also formed a similar pattern earlier this year, which also explains why it has retreated sharply. In most cases, Ethereum and Bitcoin are usually the most important drivers of activity in the crypto industry. Most altcoins normally drop when Bitcoin is in a steep freefall. 

Michael Saylor’s Strategy sold Bitcoin

The other main reason behind the current phase of the crypto market crash is that Strategy, the biggest treasury company in the world, sold Bitcoin last week.

After years of accumulation, the company dumped Bitcoin worth about $2.5 million last week. It is unclear why the company did that though the management has telegraphed it for months. 

At the same time, crypto treasury companies have largely stopped buying. Only a handful of them have bought Bitcoin and other coins this year. As the prices continues to underperform, chances are that some of these companies will start selling.

The other key reason behind the crypto market crash is that the impact of the October 10 liquidation event remains. Over 1.6 million traders were liquidated positions worth over $20 billion on that day,