Bitcoin, Pepe, Jasmy, Stellar Crash: The Real Reasons Behind the Bloodbath

Crypto markets just got sucker-punched—again. Here's what's really driving the selloff.

Fear, leverage, and good old-fashioned panic.

Bitcoin leads the nosedive, dragging altcoins like Pepe and Jasmy into the abyss. Stellar’s not immune either, despite its usual stability claims.

Market-wide deleveraging? Check. Overzealous traders getting liquidated? Obviously. Another 'black swan' event that was totally predictable? You bet.

Meanwhile, Wall Street hedges its bets—because why risk actual money when you can short retail’s hopes instead?

Crypto crash happens amid profit-taking

A potential catalyst for the ongoing crypto market crash is profit-taking among investors after Bitcoin and most altcoins surged by double and even triple digits. 

Some notable cryptocurrency investors have dumped their tokens recently. For example, Galaxy Digital sold Bitcoin worth over $500 million this week. Similarly, Chris Larsen, a co-founder of Ripple Labs, sold XRP tokens worth over $140 million. 

It is common for experienced and retail investors to book profits after a prolonged rally. Doing that helps them to protect their investments during a downturn. 

A closer look at Nansen and other analytics platforms reveals that whales and smart money investors have reduced their investments over the past few days. Whales hold 8.84 trillion Pepe tokens, down from this week’s high of 8.88 trillion.

Mean reversion and overbought conditions

From a technical standpoint, the pullback in crypto prices was driven by mean reversion and overbought signals.

Mean revision is a theory that suggests that asset prices tend to revert to their historical mean or average. In this case, most cryptocurrencies jumped significantly above their averages. 

For example, the chart below shows that the Stellar Lumens token was trading at $0.4160 on Friday, much higher than the 100-day moving average of $0.3145. Its standard deviation jumped to the December high of 0.1015. 

Therefore, the concept of mean reversion suggests that the XLM priceshould drop so that it can align with the moving average. 

At the same time, the coin was extremely overbought, with the Relative Strength Index jumping to 89.30. It is common for highly overbought tokens to pull back.

Other reasons why cryptocurrencies are going down

The crypto crash was also likely exacerbated by the upcoming Federal Reserve interest rate decision and the deadline for President Trump’s tariffs. 

Economists expect the Fed to leave interest rates unchanged, and possibly point to just two cuts for the year. Cryptocurrencies and other assets often fluctuate in the lead-up to the Fed decision.

The Fed meeting will coincide with the Aug. 1 deadline, in which the U.S. will implement higher tariffs on most countries unless they reach a deal.