Cryptocurrencies and Stocks Plunging Uncontrollably - The Reasons Behind the $5.5 Trillion Crash

A massive $5.5 trillion sell-off has shaken stocks and cryptocurrencies, which were already plummeting. Over the past two months, the S&P 500 has experienced a $4.5 trillion drop, while the cryptocurrency market has slumped around 19%. Fear and uncertainty, rather than actual financial data, seem to be driving investors away. At the beginning of the year, confidence was very high. On January 10, the total market value of cryptocurrencies was 3.23 trillion dollars and the S&P 500 stood at 5,827.03. Since then, cryptocurrencies have decreased by 18.90%, while the S&P 500 has decreased by 3.66%. The most significant decline began after February 20, when the downward trend accelerated. Speculative funds are withdrawing after 2 years, while cryptocurrency sentiment drops to 10 Kobeissi Letter, a financial analysis platform, highlights a significant shift in investor sentiment. The Crypto Fear & Greed Index, reaching an extreme high of 94 in November, has dropped to just 10 on February 27.

Currently, it is hovering at 15, much lower than last year's 82, according to CoinStates. The sudden shift from euphoria to fear has played a significant role in the market downturn. Peter Orszag, CEO of Lazard, has shed light on the larger turmoil engulfing the market by declaring: "The level of instability caused by the trade war between Canada, Mexico, and Europe is forcing boards and executives to reconsider the way forward." While some argue that the tariffs imposed by President Donald Trump are the catalyst, others believe that fear itself is the primary driver behind the sell-off wave. Speculative funds also reacted quickly. A report by Goldman Sachs revealed that institutional investors have withdrawn from stocks at the fastest pace in over two years. Exposure to technology stocks hit a 22-month low before the selloff, indicating increased aversion to risk. Technology stocks lead the market crash Major technology stocks, once the dominant force in the market, have suffered significant losses. Since the beginning of the year, some industry leaders have experienced sharp declines. Apple (AAPL) dropped 9.06%, while Microsoft (MSFT) fell 9.63%. Nvidia (NVDA) declined by 20.34% and Broadcom (AVGO) recorded a loss of 20.44%. Oracle (ORCL) also witnessed a 10.49% decrease. Signs of market tension continue to increase. The VIX index, which tracks market volatility, has surged 70% in the past month. This signals extreme instability, with traders preparing for further chaos. The S&P 500's decline has wiped out all the gains recorded since Trump's election victory on November 5th. Currently, investors are concerned about long-term prospects. Initially, optimism about Trump's economic policies, including tax cuts and deregulation, had fueled optimism. However, increasing concerns about tariffs and the risk of federal workforce reductions have severely impacted investor confidence.