The crypto market held close to the $2.5 trillion market cap with no signs of movement as traders reassess their positions amid the current market environment.

Bitcoin (BTC), the so-called digital gold asset, has stalled shortly after reclaiming the $70,000 mark following its 8% drop since hitting its Wednesday high. Ethereum (ETH) fell 2.2% to under $2,200, while other major crypto assets such as XRP (XRP), BNB (BNB), and Solana (SOL) were each down 1% on Friday.

What is triggering the crypto market slowdown?

The broader market slowdown comes as multiple pressures converge on investor sentiment. 

First, the escalation of the ongoing war in the Middle East continues to deteriorate investor appetite for risk assets. Notably, investors are rotating capital back to traditional safe-haven assets such as Gold and other precious metals to hedge against the rising inflation caused by a surge in oil prices, which reached record highs recently.

Gold price rose over 2% today, back above $4,700 per ounce, while Silver rose nearly 4% to hit the $73 mark.

Second, recent inflation data suggest that the odds of the Federal Reserve cutting interest rates this year seem off the table. The U.S. PPI data came in much hotter than expected at 0.7% month over month, and was followed by a hawkish statement by Jerome Powell, who reiterated that the Federal Reserve would continue to remain data dependent and warned that if inflation progress stalls, rate cuts will not occur.

Risk assets, including cryptocurrencies, have historically retreated or traded sideways when the Fed takes a cautious stance towards rate cuts.

Third, several key Asian tech stocks, such as Japan’s Nikkei 225 and China’s Shanghai Composite, have fallen after opening on Friday. It followed a similar trend to the U.S. tech stocks that showed over the past day.

Cryptocurrencies, including Bitcoin, have often mirrored the movements of high-growth technology indices during periods of global market uncertainty.

Fourth, Wall Street will be facing a massive $5.7 trillion options expiry today, the largest March “triple-witching” event on record, which is expected to drive significant market volatility across markets. Cryptocurrencies often trade sideways during such massive settlement windows as traders brace for spillover volatility.

Data from CoinGlass show that the crypto market experienced $393 million in liquidations across leveraged markets in the past 24 hours, with the majority from traders with long positions, suggesting trades could be unwinding rapidly as they await more clarity from the macroeconomic landscape.

Fifth, the total market cap of stablecoins has shown no net movement over the past 24 hours, standing at $312 billion. A relatively calmer stablecoin market means there is a lack of fresh liquidity entering the ecosystem to spark a meaningful recovery in prices.