The Crypto Flash Crash: The Reasons Behind Friday's Descent

After the stock market opened Friday at 8:30 a.m. ET, the crypto market plummeted. Bitcoin (CRYPTO: BTC) fell almost $4,000 to $66,440 at 3:15 p.m. ET, Ethereum (CRYPTO: ETH) fell 9% to $3,216, and Dogecoin fell 14.2%. The slide began early Friday but escalated about noon ET, when many cryptocurrencies lost double-digits.  

There were no huge crypto headlines today, however volatility sometimes occurs at the end of the week or over the weekend. That happened today for the first time in a while.  

Bad week for crypto Weak news for cryptocurrencies this week. Hotter-than-expected inflation earlier this week raised interest rates and lowered tech and growth equities, which have historically connected with sliding crypto values. The market took time to comprehend the news.  

Uniswap received a Wells notice from the SEC, a preliminary to legal action against the cryptocurrency. The market has struggled to define legality, but the SEC has sued XRP and Coinbase. However, the SEC has lost most of previous battles, so the latest ones' result is unclear. Due to regulatory uncertainty, some investors have taken profits at market peaks.  

Friday liquidations create a rout. A crypto market fall can be accelerated by leverage. Leveraged traders and declining liquidity at week's end may have aggravated the issue on Friday.  

In the past four hours, reported $668 million in long holdings liquidated. Most liquidations are limited to a few hundred million dollars every day, not that much in a few hours. The breadth of this crash is remarkable. Bitcoin, Ethereum, and Dogecoin all down, while smaller tokens are worse.  

Week ahead, volatility The crypto market has always been unpredictable, but this drop is unusual. Not sure what will stop it. Bitcoin ETFs have received billions of dollars in inflows in recent months, allowing speculators to lead and leverage moves. That's terrific when the trend rises, but if it reverses, crypto values could plummet.  

As interest rates increase and earnings season begins, investors will seek safer investments, therefore I'm skeptical about bitcoin price movements. This weekend may be the start of an unusually tumultuous industrial season.  

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