Crypto Crash Alert! Why Is Ethereum at a 4-Year Low Against Bitcoin?

Friday saw the cryptocurrency market take a big dip that wiped out most of the value accrued over the week. Bitcoin (BTC) trading volumes in the vicinity of $88,000 dropped to $83,800, representing a 3.8% loss over 24 hours. Avalanche (AVAX), Polygon (POL), Near (NEAR) and Uniswap (UNI) also all recorded close to 10% losses as did all other cryptos. Altogether, the crash lost a total value of $115 billion according to market statistics.

Impact of U.S. Stock Market and Economic Concerns

The decline wasn’t exclusive to crypto holdings, as the U.S. market overall has seen erosion following the reporting of weakness in economic reports. The S&P 500 fell 2%, and the Nasdaq lost 2.8%. Crypto-exposed stocks had deeper declines, with MicroStrategy (MSTR,) the largest corporate Bitcoin holder, down 10% and Coinbase (COIN) down 7.7%. Economic indicators released in February showed a 2.5% year-over-year price index increase and core inflation of 2.8%, which was higher than expected. Consumer spending increased a mere 0.4% and the prior revisions show weak economic growth.

Was the Bitcoin Crash Expected?

Bitcoin’s fall to $84,000 was partly expected because of the CME futures gap earlier this week. Traditionally, BTC tends to return to these gaps, so this pullback was to some extent expected. But Bitcoin’s close correlation with the Nasdaq also means that continued stock market falls could lead to further losses for crypto.

Even amid volatility, some analysts point to evidence of resilience. Figures from Santiment indicate that while international stock markets, including the S&P 500, experienced sharp drops amid fears of inflation and tariffs, Bitcoin still recorded a modest weekly gain, trading around $84,300. This points to crypto’s increasing decoupling from traditional financial markets, a far cry from its high correlation during the 2022 bear market.

Long-Term Market Outlook

Even with the recent drop, some people remain hopeful that Bitcoin will perform well in the long run. Joel Kruger, a strategist for the LMAX Group, thinks increasing crypto adoption and the greater interest from larger financial institutions will ultimately help recover price increases. There is cutting volatility but he says there is plenty of solid support on Bitcoin in the $70,000 -$75,000 range, indicating the possible upside later this year.

Risks Ahead for Bitcoin

On the other hand, crypto expert Michaël van de Poppe cautions that Bitcoin is losing steam and that critical liquidity levels are at risk of falling below 4,000. If BTC cannot hold the support, it may have to continue falling. Van de Poppe envisions another week of fall before the market settles down, with the potential to have a recovery in Q2. As Bitcoin and the overall crypto market remain under pressure, investors are watching key support and economic indicators for the next market-moving direction.