Here’s Why the Crypto Market, S&P 500, and Nasdaq 100 Are Falling

Key Insights

• The crypto market continued its recent retreat today.
• Top indices like the Nasdaq 100 and S&P 500 fell by over 3%.
• The volatility is continuing after the hawkish Federal Reserve decision.

The crypto market remained under pressure today, with Bitcoin and most altcoins being in the red. The market valuation of all tokens retreated by 4% in the last 24 hours to $2.14 trillion. Similarly, the Nasdaq 100 futures fell by 3%, while those linked to the Dow Jones and S&P 500 retreated by 0.5% and 1.45%, respectively.

Crypto market capitalization chart | Source: CMC

Crypto Market, S&P 500, and Nasdaq 100 Falling as Traders Move to Safety

The crypto and stock markets are in a strong downward trend as investors rush to safety after last week’s Federal Reserve interest rate decision.

A good evidence of this is the US Dollar Index (DXY), which jumped to $101.28, its highest level since May last year. It has soared by 6% from its lowest level this year.

Similarly, the two-year bond yield soared to 4.23%, its highest level since February last year. It has soared from the year-to-date low of 3.373%. Other bond yields have continued rising after the Federal Reserve delivered its interest rate decision last week.

In its meeting last week, the Fed decided to leave interest rates unchanged between 3.50% and 3.75%. The most notable part of the meeting was the dot plot, which showed that nine officials expect the bank to hike interest rates later this year. Stocks and the crypto market struggle whenever the Fed has embraced a hawkish tone.

Bitcoin and Ethereum ETF Outflows Continue

The crypto market is retreating as demand in the spot and ETF markets continues falling. Data shows that spot Bitcoin ETFs shed over $68 million on Monday, after losing $90.6 million on Friday. These funds have lost $2.3 billion this month after losing $2.4 billion in May.

The same is happening with Ethereum, the second-biggest coin in the industry. Spot Ethereum ETFs lost $66 million in assets on Monday, bringing this month’s outflow to $264 million. These funds have lost over $1.3 billion this year, bringing their cumulative inflows to about $11.1 billion.

Other top altcoin ETFs like XRP, Solana, Dogecoin, and BNB ETF inflows have remained under pressure in the past few months.

Meanwhile, the futures open interest has continued falling in the past few months, a trend that accelerated after the October 10 liquidation event. They have dropped to $98 billion from last year’s high of $302 billion. Liquidations have also jumped, reaching over $677 million.

Stock Market Retreating Amid Profit Taking Ahead of Micron Earnings

Meanwhile, the Nasdaq 100 and S&P 500 indices retreat coincided with the developments in South Korea and Japan. South Korea’s Kospi Index dropped by 10%, erasing billions of dollars in value, with Samsung and SK Hynix’s stock falling by over 8%. Japan’s Nikkei 225 Index retreated by 3.55%, with Kioxia being the top laggard.

The stock market is falling as investors wait for the upcoming Micron earnings, which will come out on Wednesday. These earnings are important because Micron is one of the biggest companies globally, with a market capitalization of over $1.2 trillion.

It is also one of the top players in the High Bandwidth Memory (HBM) industry, which is doing well. Its results will be a barometer of the ongoing artificial intelligence (AI) boom. Most notably, companies in the memory industry are the top gainers in the stock market.

Therefore, there is fear that the stock will drop if its guidance is not as strong as expected, a move that will drag the other memory companies. A good example of this is the recent Broadcom earnings that led to a shock in the stock market.

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