Why is Crypto Down Today: Reasons of Crypto Crashing

Why is Crypto Down Today: Reasons of Crypto Crash and Will it Recover

The cryptocurrency market is facing a sharp downturn today, with major asset like Bitcoin going down. This drop is largely driven by weak demand for US spot Bitcoin and Ethereum ETFs, combined with concerns over U.S. economic data. The ISM Manufacturing PMI signals ongoing challenges in the broader economy, while uncertainties around the Federal Reserve’s upcoming rate decisions add to market volatility, raising fears of a potential crypto crash.

Why is Crypto Crashing Today - Reasons

Low Demand for US Spot Bitcoin and Ethereum ETFs

In recent weeks, demand for US-based spot Bitcoin and Ethereum ETFs has been weak. On Tuesday, the US spot Bitcoin ETFs experienced their worst selloffs, with a net cash outflow of approximately $287 million, primarily driven by Fidelity’s FBTC. This marks five consecutive days of significant cash outflows for US spot BTC ETFs.

U.S. Economic Data Highlights Market Challenges

This week is pivotal for U.S. economic data, with early reports signaling difficulties for both traditional and crypto markets. The ISM Manufacturing PMI for August indicated continued contraction in the manufacturing sector, posting a reading of 47.2, slightly higher than July’s 46.8 but still below the expected 47.5. The report suggests a stagflation scenario, with new orders dropping to 44.6 and prices paid increasing to 54.0.

Federal Reserve’s Upcoming Meeting Complicated by Economic Data

These numbers point to a dual challenge of slowing growth and rising inflation, making the Federal Reserve's decision on interest rates more complex ahead of its next meeting. 

After the release of the weak data, the probability of a 50 basis point rate cut rose to 39% from 30%, according to the CME FedWatch tool, though the majority of traders still expect a smaller 25 basis point cut with a 61% likelihood.

Key Focus on August Employment Report

The main focus this week is Friday's employment report for August, which could heavily influence the Fed's decision on rate cuts. 

Economists predict a rebound in job gains to 160,000, compared to July’s disappointing 114,000, with the unemployment rate expected to decrease from 4.3% to 4.2%.

Will Crypto Recover Today

Crypto recovery is uncertain in the short term due to weak demand for US spot Bitcoin and Ethereum ETFs, coupled with economic challenges highlighted by U.S. manufacturing data and inflation concerns. The Federal Reserve’s rate decision and upcoming employment reports will play a crucial role in determining whether the market can stabilize or face further declines.

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