What is the cause of today’s crypto crash?

Today, the total capitalization of the crypto market fell to just over $1.2 trillion, while yesterday it was over $1.2 trillion and on April 18 it was also over $1.2 trillion.

As can be seen from this data, it is not actually a real collapse, but a retracement.

For example, yesterday morning the price of Bitcoin was still above $30,000, but during the day it fell just above $29,000, and overnight it fell as low as $28,600. It later went back slightly to $28,900.

Ethereum’s price yesterday morning was $2,100, then fell to $1,970 during the day, and to $1,920 overnight. It has now retreated slightly to $1,950.

But while this is by no means a crash, just a retracement, it may not be over yet.

The reasons for today’s crypto market crash

There are probably two main reasons behind this retracement.

The first, trivially, is that in recent weeks prices had risen a lot, and during the first months of 2023 they had also risen very quickly.

For example, until yesterday Bitcoin was +83% since the beginning of the year, so much so that a retracement was possible. Ethereum was at +76%, but the price had risen 12% in just two days after the Shapella update of 12%.

Since growth in the crypto market is never linear, a temporary retracement is often triggered after a period of rapid and consistent increases, as is happening these days.

But there is also another reason.

In fact, Ethereum’s Shapella update has finally unlocked staked ETH after more than two years.

Initially, this had not caused a rush of withdrawals, followed by a wave of selling, but this was also due to the fact that not all Ethereum staking pools had already enabled withdrawals on April 13.

Yesterday, for example, Binance, which is the third largest Ethereum staking pool in the world, activated them, with Lido, which is the main ETH staking pool, enabling them in the first week of May.

Thus, it is no coincidence that Ethereum’s price is returning to pre-update levels, i.e. those of April 11, because since the rush of withdrawals was not triggered as soon as Shapella was used, some believed that the danger was averted.

Yesterday, however, the scenario that had been widely predicted for weeks now materialized, except that it happened a week later than expected.

Key levels to remember

Having said that, it should be added that the current price levels of Bitcoin and Ethereum are actually not a concern at all, for now.

It is enough to consider that ETH currently has a price higher than even on April 11, and in 2023 is only lower than the price touched in the days after the update.

A similar argument applies to Bitcoin, whose current price is exactly in line with the end of March, lower in 2023 only than the price after April 9.

However, one should not forget the fact that the retracement that began yesterday could continue further, especially considering the opening of withdrawals at Lido.

Right now, the level to watch for Bitcoin seems to be the $25,000 level, which is what could theoretically act as support for possible upside.

Already in recent months, the rapid and consistent increases in Bitcoin’s price have been interspersed with sharp retracements, such as on February 9 and especially the one in the first half of March, when it went from $23,700 to $20,300 in just eight days.

These are not real collapses, but retracements that do not lose even 20% of the market value. This is a completely normal and natural dynamic in an ever-volatile market such as cryptocurrencies.

An expected decline after today’s crypto crash?

Should the price of Bitcoin not fall below $25,000 at this stage, a rebound can be expected later.

For this hypothetical regression, the thresholds for attention appear to be three.

The first, of course, is that of a simple return to $30,000, reached in early April for the first time since May 2022. Such a bounce would not be particularly interesting.

The second, on the other hand, would already be more interesting, because the comparison with 2019 shows $35,000 by June as a possible goal.

The comparison with 2019 is very interesting, both because the two trends so far have proven to be similar in some ways, and especially because 2019 was also a rebound year after the bear market after the bubble market of 2018.

From this point of view, $35,000 is quite an important threshold, because if such a level is not reached before the end of June, it would mean that the similarities with 2019 would be over.

But there is also a third threshold.

In fact, there are several forecasts converging that during 2023, the price of Bitcoin will have a chance to move towards $40,000. Not all analysts agree with this prediction, but the average seems to be just that.

Crypto markets are likely to follow suit.