What's Next After Crypto Crashes Erase 7% of the Market?

The latest crypto crashes have wiped out more than 7% of the market cap, with the total falling from above $2.50 trillion to $2.32 trillion as of press time. Bitcoin led the capital outflow, shedding more than $10K per token. Its market cap dropped from $1.50 trillion to $1.34 trillion while the price slid from above $77K to $67K. The move came after major institutions like Strategy announced the sale of 32 BTC for the first time since 2022.

On the charts, Bitcoin [BTC] failed to reclaim a CME Gap between $78K and $79K and dropped into the $67K range. That translates to a wipeout of more than $250 billion in less than a week. Not a great week for the bulls.

In general, the derivatives market liquidated more than $700 million in long positions over the past 24 hours. Of that amount, $283 million was wiped out in a single hour. Volatility surged to 20%, the biggest single-day spike in four months since February's 55% print. The Crypto Fear & Greed Index dropped to 11, indicating extreme anxiety levels — which, historically, is when the timeline starts filling up with "this is the bottom" calls.

As the recent crypto crashes wiped out 7% of the total cap, here is what could happen next: Traders should reassess their long positions because they are likely to obliterate liquidation levels below current prices. A cascade of orders below $67,404 across multiple exchanges would hit the market. Additionally, the broader retail sector is likely to detest crypto due to the increasing number of scams and rug pulls. AI has driven a spike of more than 500% in these cases. Wall Street joined this economy to ensure 24/7 trading of crypto and equities, among other asset classes, through tokenization. That way, Wall Street could take over crypto and leave everyone buying paper card derivatives. More importantly, there was a shift in trading from crypto to tokenized equities, ETFs, and IPOs after the CFTC approval of BTC perpetual futures. For instance, much of the capital had shifted to IPOs like SpaceX, OpenAI, Anthropic, and Kraken, among others. These IPOs were similar to the Coinbase [COIN] listing. Hence, the stock market was making new highs, as seen in the S&P 500 and Nasdaq indices. It's worth noting that, over time, the crypto market could become larger once the dust settles, as trendy narratives tend to revert to their mean positions. As a result, this capital would eventually shift back to cryptocurrencies.