The crypto market is collapsing and these are the possible reasons

Source: CritpoTendencia Original Title: The cryptocurrency market is collapsing and these are the possible reasons Original Link: A wave of massive liquidations is sweeping across the cryptocurrency market, causing abrupt price drops. The most important assets in the ecosystem, such as Bitcoin and Ethereum, are experiencing significant sell-offs. This analysis reviews the factors that are likely behind this sharp decline.

At the time of writing this note, the price of BTC has accumulated a decline of -24.5% from its recent all-time high on October 6. This translates to an exchange value of $96,400 per coin, leaving the pioneering cryptocurrency with a modest +1.6% so far this year (YTD).

Meanwhile, the total market capitalization of crypto has contracted by more than $1 trillion from its recent peaks. This is a large magnitude correction that is leading some analysts to raise the possibility of a bearish market forming. Capital outflows in both BTC and ETH ETFs amplify these fears.

The reasons behind this new shake-up can be diverse, or even a combination of factors. However, one of the most relevant triggers is the confirmation that the October CPI inflation report will not be published in the United States. This is compounded by statements from Federal Reserve member Neel Kashkari, who stated that inflation rose significantly during the government shutdown.

The cryptocurrency market downturn could continue

Market concerns are intensifying due to the worsening outlook related to monetary policy. According to the CME FedWatch, the odds of a rate cut by the Federal Reserve have decreased considerably. The probability of the Fed reducing by 25 basis points in December is now 52.1%, down from the previous 62.9%.

In simple terms, if the U.S. central bank does not implement a rate cut in December, the high-rate economy could last at least until the first quarter of 2026. And if, as Kashkari suggests, inflation accelerated during the shutdown, the rate cuts could be frozen for even longer.

The impact of all this on risk assets is evident, especially in the more volatile ones such as cryptocurrencies. The outlook could worsen if inflation continues to rise. In a scenario where prices keep rising and the labor market weakens, the United States could approach the dreaded stagflation.

As can be seen, although the fundamentals of the crypto market remain solid, external conditions are not favorable. This could be enough to prolong the bearish pressure on BTC, ETH, SOL, and also on lower capitalization assets, including memecoins.