Crypto Market at Risk of a Steeper Crash as Top Economist Issues Major Warning

Key Insights

• The crypto market may be at risk of a deeper dive this year, according to Mark Zandi.
• Third-party data shows that the futures open interest has dropped to $92 billion.
• Bitcoin has formed a bearish pennant pattern, pointing to more downside.

The crypto market crash accelerated on Monday, continuing a downward trend that has been going on since last year. This retreat may accelerate after Mark Zandi, a top economist, issued a major warning on complacency among investors.

Mark Zandi Warns About Crypto, Stocks, and Gold

In an X post, Mark Zandi, the top economist at Moody’s, warned that the financial market was increasingly fraught, a move that may lead to increased sell-off in the coming weeks or months.

He warned that the threat was riskier for the stock and corporate bond markets. Most notably, he added that the risk may spread in other areas, including stocks, gold, and silver.

First, Zandi noted that the financial market was rife with speculation, with investors allocating capital based on faith that assets would rise in the future since they jumped in the past.

Second, he argued that the US economy was not doing well, with the GDP growing by just 2%, which is below its potential. A good example of this is the labor market, which has largely flatlined in the past few months.

Third, he pointed to the treasury market, which has become more fragile as the budget deficit has continued rising. Data shows that longer-term bond yields have continued rising this year as the government debt has soared to over $37 trillion.

Finally, he pointed to the fact that markets, especially gold and the stock market have overextended in the past few months.

Zandi’s views are notable as he is one of the most prominent economists in the United States. He has served as the Chief Economist at Moody’s, a top credit rating company, for years.

Crypto Prices are Facing More Risks

The crypto market is facing additional risks, which may lead to more downside momentum in the coming months.

One of the main immediate risks is that Donald Trump is considering striking Iran as soon as this week. In a statement on Friday, he warned that he is considering a limited strike that may lead to a wider war in the region.

Iran, on the other hand, has warned that it will be forced to respond by launching a major attack on US military bases and shutting the Strait of Hormuz. It has also warned that it might sink an aircraft carrier.

A war in Iran will be risky for the crypto market for two main reasons. First, it will lead to higher inflation, making it hard for the Federal Reserve to cut interest rates.

Second, the war will lead to more volatility, a notable thing as Bitcoin has proven that it has not a safe-haven asset. It has always dropped whenever major risks emerged.

Falling Open Interest and Rising Liquidations

The other main catalyst for the crypto market crash is the fact that futures open interest has continued falling in the past few months.

Data shows that the futures open interest has crashed to $92 billion on Monday from last year’s high of over $255 billion.

Falling open interest is a bearish sign as it means weak demand for Bitcoin and most altcoins.

At the same time, many cryptocurrencies are being liquidated. Data shows that liquidations jumped by 535% on Monday to over $508 million. Liquidations have remained at an elevated level since October 10 when they soared to over $20 billion.

Bitcoin Price Technical Analysis Points to More Downside

Meanwhile, technicals suggest that Bitcoin may crash in the coming days. A Bitcoin crash will lead to more downside in the broader crypto market.

The daily timeframe chart shows that Bitcoin has remained below all moving averages and the Supertrend indicator.

It has also formed a bearish pennant pattern, which is made up of a vertical line and a symmetrical triangle pattern.

Therefore, there is a risk that the coin will tumble in the coming weeks, potentially to the year-to-date low of $60,000.

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