Tsunami Warning Has Traders Watching for a Repeat of the 2020 “Panic Sell” in Crypto

Official agencies have issued a tsunami warning for the Pacific coasts of the United States, Japan, and other regions following a massive 8.7 magnitude earthquake near Russia’s Kamchatka Peninsula. The warning has put global markets on edge, with President Donald Trump making a public appeal for those in the affected areas to stay safe.

Depending on the severity of the tsunami, the highly leveraged and sentiment-driven crypto market could be impacted. Historical precedents show that major external shocks can trigger sharp sell-offs.

Related: Bitcoin ($BTC) Price Prediction for July 30

“Panic selling” on the horizon?

For instance, the 2020 COVID-19 pandemic caused a spike in panic selling that saw the Bitcoin price plummet over 37% in 24 hours, liquidating over $1 billion in leveraged positions.

Related: Bitcoin ETFs Create “Demand Shock,” Buying 10x More $BTC Than Is Mined

While the current situation may not cause a similar economic downturn, crypto traders must remain vigilant for the risk of a fear-driven sell-off.

On-chain data shows the market is not overheated

Despite this risk, the crypto market has matured significantly in recent years, with massive adoption from both retail and corporate players like Strategy (NASDAQ: MSTR).

Crucially, on-chain data from CryptoQuant suggests the market has not experienced the significant overheating that was recorded before the major corrections seen earlier this year.

As a result, CryptoQuant’s data analysis suggests the wider crypto market could record bullish sentiment in the coming months despite a potential panic selloff triggered by the Pacific Tsunami.

Source: CryptoQuant

Central bank decisions add to market uncertainty

Adding to the market’s tension, the U.S. Federal Reserve is also meeting on Wednesday to decide on interest rates. Wall Street analysts predict the Fed will hold the rate steady at its current 4.25%–4.5% range, a level unchanged since December. This decision, along with rate statements from the Bank of Canada and the Bank of Japan this week, will be a major factor in the market’s volatility.

Alongside these central bank decisions, traders will be closely monitoring capital flows. The daily cash inflows to the U.S. spot Bitcoin and Ether ETFs will provide a clear, real-time picture of institutional sentiment in the face of these combined macro pressures.