The crypto market is imploding, with the total market capitalization in the industry crashing from over $3.5 trillion in November to $2.58 trillion. Bitcoin and most altcoins like Shiba Inu, Pepe, XRP, and Pi Network have all retreated by double digits from their 2024 highs.
XRP price has tumbled by 16% in the last seven days to trade at $2. Bitcoin has plunged to $79,000, while Shiba Inu, Pepe, and Pi Network were down by over 20% in the last few days. So, let’s explore why the cryptocurrency market is crashing and whether it will bounce back.
Buy the rumor, sell the news
Bitcoin and most cryptocurrencies are plunging because of a scenario known as buy the rumor, sell the news.
This is a situation where investors buy assets ahead of a major event and then sell them when it happens.
In this case, most cryptocurrencies jumped after Donald Trump’s victory in November last year, and then crashed after his inauguration.
Most recently, these coins rose after Trump said that he would sign an executive order on creating crypto reserves and hold a summit on the industry. They then crashed after these events happened.
This buy the rumor, sell the news event has happened many times before. For example, Ethereum jumped in August and September last year as speculation about ETF approval rose and then crashed after it happened.
Macro news are hurting the crypto market
The macro events are the other main reasons why the crypto market is plunging. The most important macro events this year has been Donald Trump’s decision to impose sweeping tariffs on imports from most countries, including allies like Canada and Mexico.
The 25% tariffs are significantly high and could hurt all businesses in the US. For example, if an iPhone costs $1,000, its price will rise to $1,250 if the new tariffs are applied. A vehicle that sells for $50,000 will start going for $62,500 after tariffs.
Trump’s aim is to have countries set their businesses in the US and avoid tariffs. The challenge, however, is that even companies in the US are paying tariffs when they import raw materials.
Also, it will be cheaper for companies to maintain their operations in other countries and just hike prices.
This macro event also explains why the stock market has also crashed in the past two months. The Nasdaq 100 index has slumped by over 14% from its all-time high. Similarly, the Russell 2000 and S&P 500 indices have slumped, with Elon Musk’s net worth plunging by $132 billion this year to $301 billion.
Read more: Wall Street legend says US stocks are in a bubble: 3 Nasdaq 100 shares to sell
Will Shiba Inu, Pepe, Shiba Inu, XRP, and other altcoins rebound?
So, will the crypto market go back up? There are chances that these cryptocurrencies will recover in the next few months.
For one, this is not the first time that these assets have entered into a bear market. Just last year, Pepe and other altcoins plunged by over 70% from their highest level in March to their lowest points in August. They then bounced back in the fourth quarter.
What the crypto market needs is a simple catalyst, and it will start going parabolic. For example, most of these assets will start surging if the Federal Reserve delivers an emergency rate cut or when Trump ends the tariffs.
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