I think at current moment emotional trading is on top.

The cryptocurrency market is very popular for its unexpected crashes and rallies.Below are five key factors that cause crypto crashes mostly. I believe if everyone understands them he can reduce his losses.
1. Global Economic Policies and Trade Tensions
Global events, mainly economic policies and trade tensions, have a huge impact on the crypto market.
Example: In 2025, the announcement of new trade tariffs by the U.S. on China caused a sharp decline in risk assets and also cryptocurrencies.Impact: The uncertainty due to global economic policies usually leads investors to sell off riskier assets like cryptocurrencies in favor of more stable investments.Market Effect: Bitcoin’s price dropped by 5.5%, and stocks related to the crypto industry like IBIT also saw huge declines. A shift in global economic sentiment can cause panic wave selling and trigger market corrections.
Cryptocurrencies are still heavily affected by traditional financial markets, and geopolitical events can boost these effects.
2. Market Movement and Emotional Trading
Crypto markets mainly move due to emotions and short-term trends rather than fundamental value.
Speculative Bubbles: Investors usually buy when prices are moving by the fear of missing out (FOMO) or excitement of any coin. These speculative bubbles can blast quickly but burst just as fast, causing sharp crashes.Panic Selling: When prices start to fall, the emotional response of traders usually intensifies the issue, causing them to panic sell, which further moves prices down.Herd Mentality: Many crypto traders follow trends rather than conduct in-depth research. If a popular influencer or news channel declares a specific coin is the next big thing, it can quickly pump , followed by a crash once the market corrects itself.
Understanding that the crypto market moves on sentiment rather than logic is important for traders who want to minimize risks.
3. Regulatory Uncertainty and Policy Changes
Cryptocurrency regulations are still changing day by day around the world.
Recent Example: In Pakistan, the establishment of the Pakistan Crypto Council (PCC) is showing they are interested in regulating crypto, but the lack of a standardized global framework remains an issue.Regulatory Risks: Regulatory bodies in various countries have continued to introduce sudden policy changes regarding cryptocurrencies. Government crackdowns or sudden bans fear can affect the market.Global Regulatory Trends: Countries like China and India have already implemented crypto regulations but the U.S. is still thinking how to regulate crypto.Impact on Markets: A single U.S. SEC or a major government announcement  about crypto can create a market upward or downward rally, as we saw in 2025 with discussions about regulating digital asset exchanges.
4. Security Breaches and Technological Failures
Cryptocurrency is constantly facing cyberattacks and technological failures that lower investor confidence.
Security Breaches: High-profile hacks like Bybit hack resulted in the loss of Billions of dollars worth of cryptocurrencies.Examples: In recent years, major exchanges like Binance. Bybit and Coinbase faced security issues, which caused panic and market crashes. Investors, fearing that their assets are not secure, often liquidate their holdings at the end.Impact: When a large crypto exchange is hacked, it causes significant sell-offs that cause prices even lower. Due to this fear and lack of trust in platforms, the market is constantly facing lack of investor interest.
5. Macroeconomic Factors and Investor Sentiment
Usually inflation, interest rates, and economic growth (Macroeconomic conditions) heavily impact the crypto market.
Example: When CPI or interest rates are increased or decreased by central banks, the market fluctuates heavily.Market Reaction: During economic instability, many investors prefer to invest in safe-haven assets like gold or bonds, cashing out from riskier assets such as cryptocurrencies.Global Crises: Financial crises, pandemics, or natural disasters can trigger panic, causing investors to liquidate their crypto holdings for cash.Investor Sentiment: Crypto markets are highly sensitive to global news, so any major economic shift can create massive sell-offs. A sudden downturn in traditional markets often translates to a crypto crash as well.