The crypto market always feels like it’s on the verge of a meltdown or a moonshot. To survive, you have to know what can set off the next big crash.
Looking back at disasters like the 2018 bloodbath and the FTX implosion, we see a messy mix of global money problems, shaky market foundations, and good old-fashioned human panic.
At its heart, a crypto crisis is just a violent, fast-moving price collapse. Confidence evaporates, and everyone rushes for the exits at once.
The global economy
Crypto used to be its own weird little island, but now it’s firmly connected to the mainland.
When central banks hike interest rates, inflation won’t quit, or wars break out, big money gets scared. Investors dump risky things like crypto and run to safer options.
The Federal Reserve’s rate hikes in 2022 are a huge reason the market stayed so dead for so long.
Governments making rules
The ever-present threat of a regulatory hammer blow spooks the market. A new law, an investigation into a big exchange, or a country banning crypto can cause prices to tumble.
Every time China has cracked down on Bitcoin mining or trading, the market has taken a serious hit.
When a giant falls, everyone gets crushed
The crypto world is a tangled web. When one major company goes down, it can drag dozens of others with it.
We saw this clearly when the Terra-LUNA project died and took others with it, and even more so when FTX turned out to be a house of cards.
The collapse of these titans created a cash crunch that bankrupted other firms that were exposed to them, causing a chain reaction of forced selling.
Tech failures and billion-dollar hacks
The technology behind crypto is brilliant but not bulletproof. A major bug, a network going dark, or a massive hack can destroy trust in the system’s safety.
This sends people running and pulling their money out. Just in the first nine months of 2024, hackers and scammers made off with over $2.1 billion from the crypto world.
What the blockchain is saying
A Flood of Coins to Exchanges: If a huge amount of crypto suddenly moves onto exchanges, it’s a bad sign. It often means the “whales,” or massive holders, are about to sell off their stash, which can tank the price.
Too Much Hype: A sudden, crazy spike in new users and transactions can look good, but it often signals a bubble of pure speculation that’s about to pop. When those numbers fall off a cliff, it means the party’s over.
Gambling on Steroids: When the derivatives markets are full of people betting with huge amounts of borrowed money, things get dangerous. If too many people are betting the price will go up, it sets the stage for a massive wipeout called a “long squeeze” that liquidates them all.
What the market is feeling
Off-the-charts greed: The Fear & Greed Index is a good contrarian tool. When it hits “extreme greed,” it means the market is high on its own supply and probably due for a reality check.
The RSI is screaming “overbought”: When the Relative Strength Index (RSI) goes above 70, it’s a classic signal that an asset has gone up too fast and is set for a fall.
When your barber gives you crypto tips: A classic sign of a market top is when everyday people are suddenly crypto experts, chasing quick profits from worthless “meme coins.” This kind of gambling fever and get-rich-quick talk is a sure sign of a bubble.
