What Caused the Recent Crypto Market Crash?

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The total cryptocurrency market capitalization is down about 12% within the past week. Price has plummeted through its 200-day moving average; however, the chart is still respecting key levels within a bullish Elliot wave sequence. 

On Wednesday, the FOMC (Federal Open Market Committee) released the minutes from its meeting held on December 14–15, 2021. These minutes showed that December’s Fed meeting was decidedly hawkish. For the past two days, this realization has prompted investors in the crypto market to sell and secure profits. 

Crypto investors are currently fearful that the US Federal Reserve Bank will raise interest rates as early as March.  According to futures data provided by the CME FedWatch Tool, there is a 68.63% chance the Fed will raise interest rates during the 3/16/2022 FOMC meeting. 

Going by the CME futures data, the market currently expects 7 rate hikes to occur in 2022. However, our Senior Market Analyst William Noble believes Omicron and other Covid variants will prevent this. 

Moving forward, despite recent bearish news and price action, the total cryptocurrency market cap still appears to be moving within the fifth wave of a bullish Elliott wave cycle. 

In accordance with the Elliott wave chart, the crypto market maintains a 70% chance to end 2022 between 2.69 – 3.61 Trillion. There is also a 15% chance the total crypto market ends 2022 between 2.11 – 2.69 Trillion, and another 15% chance the market reaches 3.62 – 5.18 Trillion. 

In 2022, the decisions made by the Fed will be dependent on inflation numbers. Also, if Covid variants continue to emerge, then it will become less likely for the Fed to raise interest rates. 

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