A major divergence is happening between the crypto market and US stocks. Bitcoin and top altcoins like Ethereum, Cardano, and XRP have dived this year, while top US indices like the S&P 500 and Nasdaq 100 have continued to hit their all-time highs.
Bitcoin price vs S&P 500 and Nasdaq 100 indices | Source: TradingView
Crypto Market Crashing Continues Despite Bullish Catalysts
Bitcoin and other altcoins are crashing this year, despite some crucial catalysts. BTC dropped to $62,000 and is quickly targeting its lowest level this year, $59,000. A drop below that level may lead to more weakness over time.
Ethereum price also continued falling, reaching a low of $1,700, a few points above the year-to-date low. In total, the crypto market cap has dropped by over 2% in the past 24 hours to $2.17 trillion. At its peak, the industry was valued at over $4 trillion.
The crypto market crash has happened despite some crucial catalysts. For one, crude oil prices have continued to fall this week, with Brent and West Texas Intermediate (WTI) moving below the key support level of $80. This happened after the US and Iran reached a ceasefire agreement.
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Falling oil prices have created a risk-on sentiment in the market, which would, in theory, boost crypto prices, as it suggests the Fed will not feel the urgency to hike interest rates.
Also, the Trump administration has been highly supportive of the industry, with the SEC ending some key lawsuits. Washington has already voted for the GENIUS Act, and the CLARITY Act has moved from the Senate Banking Committee.
Traders’ Capitulation and the AI Boom
There are a few reasons the crypto market has deviated from popular US indices like the Nasdaq-100 and the S&P 500 Index this year. First, crypto traders may have begun to capitulate as Bitcoin and top altcoins have underperformed the market this year.
For example, Bitcoin has dropped by 27% this year, while the Nasdaq 100 has soared by over 20%. The same trend occurred last year, prompting some crypto investors to move to the stock market.
A good example of this is in the ETF market, where Bitcoin and Ethereum ETFs have lost over $5 billion in assets this year. Stock ETFs have added over $1 trillion in assets in 2016 amid the AI boom.
At the same time, some key events in the crypto industry have contributed to this performance. The most important one is the October 10 liquidation event in which over 1.6 million traders were wiped out, losing over $20 billion.
Crypto hacks and pump-and-dump schemes have also increased this year, undermining traders’ confidence. Some of the recent events were on tokens like Humanity Protocol, SKYAI, and Audiera. Data shows that over $1.6 billion has been stolen through hacks in the last 12 months.
Trump’s policies have also contributed to this crash, with investors being concerned about weak protections by the SEC and the US administration. For example, his launch of the Trump and Melania meme coins last year led to low investor confidence.
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