Why is the crypto market plummeting today?

The capitalization of the crypto market collapsed by 2.2% on Tuesday, reaching $2.34 trillion, in a context of geopolitical tensions and electoral uncertainties in the United States. Bitcoin, the queen of cryptos, fell below $67,000, dragging the entire market into its downward spiral.

the crypto market in the red

Election uncertainty weighs on the crypto market

On Wall Street this Tuesday morning, crypto investors massively sold their positions, worried about the uncertain outcome of the American presidential election.

The tight race between former President Trump (63.5% chance according to Polymarket) and Vice President Harris (36.2%) is causing widespread risk aversion. Large investment funds temporarily abandon volatile assets like cryptos for the benefit of traditional safe havens.

The divergent positions of the candidates on the regulation of the sector fuel this nervousness. Trump openly displays his support for cryptos, while Harris maintains an ambiguous position despite some encouraging statements. Faced with these regulatory uncertainties, institutional investors are massively reducing their exposure to the crypto market.

Trading volumes on the main platforms exploded, reaching $157 billion over 24 hours, reflecting widespread panic selling.

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The Fed dampens hopes of a monetary pivot

The second factor weighing on prices comes from the monetary front. The latest statements from members of the Federal Reserve suggest a prolonged maintenance of key rates at their current level, contrary to market expectations which were counting on cuts from the spring.

This perspective mechanically strengthens the dollar and bond yields, two variables traditionally negatively correlated with cryptoassets. The 10-year yield thus crossed 4.5% this morning, its highest since 2007.

Crypto fund managers are therefore adjusting their positions in the face of this new paradigm of sustainably high rates, favoring short-term prudence.

In sum, the current correction illustrates the crypto market's continued sensitivity to traditional macroeconomic and political factors. Only a clarification of the electoral landscape or a change of tone from the Fed could reverse this downward dynamic in the coming weeks.

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