Crypto Crash Reason: $116 Billion Wiped Out in 24 Hours, Here's Why

March 28th has brought a significant blow to the cryptocurrency market, with the total market cap dropping by 4.00%, now standing at $2.72 trillion. Leading the decline, Bitcoin ($ BTC ) lost 3.55%, reducing its market cap to $1.66 trillion. Ethereum ($ ETH ) suffered an even sharper hit, down 6.40%, settling at $226.24 billion. Stablecoins have shown resilience, with only a minor dip of 0.06% to $219.21 billion, while the "Others" category bled heavily, losing 5.67% to stand at $616.57 billion.

Why Are Crypto Prices Down?

Multiple factors have driven the latest downturn in the cryptocurrency market. Let’s break down the primary contributors:

• Escalation of Trade Wars Impacting Risk Sentiment
• Liquidations of Overleveraged Futures Positions
• Prevailing Bearish Technical Setups

Top cryptos by market cap - coinmarketcap

Trade Wars Add to the Market's Misery

Rising global trade tensions are at the core of the current crypto market decline. The latest escalation stems from the United States government’s decision to impose steep tariffs on auto imports and other goods. On March 25th, the US announced 25% tariffs on imports from Canada, Mexico, and China, effective April 3rd. This protectionist move has stoked fears of a global economic slowdown, dampening sentiment across all risk asset classes.

The ripple effect has been felt beyond crypto. For instance, the S&P 500 has also declined by 1.85% since the announcement, further indicating the market-wide impact of these trade tensions.

High Inflation Data Rattles Investors

Friday's release of the US Core PCE Price Index added to the market's anxiety. The index, which excludes volatile food and energy prices, rose 2.8% year-over-year in February, surpassing expectations of 2.7%.

This higher-than-expected inflation data compounded fears of tighter monetary policies, sending shockwaves through the crypto market.

How It Played Out:

Bitcoin dropped 4%, slipping below $84,000, while several other major cryptocurrencies followed suit. Investors, already on edge due to Trump’s tariff threats, dumped their holdings, fueling a sell-off across the market.

AI Tokens Also Take a Hit

The artificial intelligence (AI) sector, a rising star in the crypto space, has not been spared. Since the market meltdown, top AI tokens like NEAR, Bittensor, and Render have plummeted by 10.8%, 10%, and 8%, respectively.

This sector-wide decline highlights the fragility of emerging narratives in the face of broader market uncertainty.

What’s Next for Crypto?

The question on every trader’s mind is whether this downturn is a temporary correction or the start of a prolonged bear market. With trade wars heating up, inflation fears mounting, and technical indicators turning bearish, it’s clear that caution is warranted.

Traders should brace for continued volatility and focus on risk management to navigate these turbulent times. Stay informed, and stay prepared—this ride is far from over.