Bitcoin (BTC) and Ethereum (ETH) experienced significant declines, each falling over 7% in a 24-hour period. This downturn has heightened market fears, reflected in the Fear and Greed index, which dropped to 11.00, marking the year’s lowest level of bearish sentiment.
Market Analysis and Sentiment
According to Alex Kupsikevich, chief market analyst at The FxPro, Bitcoin has retraced to a crucial resistance zone that persisted from March to October 2024. This shift attracts bargain hunters looking for potential opportunities. Kupsikevich also noted that past market cycles suggest that similar sell-offs, such as that in May 2022, often lead to price consolidation followed by further declines.
Sentiment in the crypto market has soured due to broader economic issues, including geopolitical tensions and changes in interest rates, which dull investor appetite for volatile assets like XRP. Bitget’s chief market analyst indicated that the selling of derivatives and leveraged positions exacerbated price declines.
Impact of Global Events
Volatility in traditional markets, particularly oil prices spurred by potential U.S.-Iran tensions, complicates the landscape for cryptocurrency investors. Elevated oil prices could increase global inflation, adding more pressure to crypto markets.
Liquidations and Market Dynamics
- Capital outflows in the crypto futures market continued, with open interest dropping to $103 billion.
- Over $800 million in leveraged bets were liquidated within a single day as Bitcoin fell below the critical support level of $70,000.
Despite these liquidations, 90-day Bitcoin futures are still priced above the spot market, signaling ongoing speculative interest. Typically, bear markets see a loss of this premium as prices bottom out.
In contrast, open interest for certain tokens like Tether Gold (XAUT), LINK, Tron (TRX), and PEPE showed signs of growth. Meanwhile, many altcoins reflected negative annualized perpetual funding rates, indicating a shift towards bearish trading perspectives.
Altcoin Performance
- Bitcoin’s decline had a ripple effect on the altcoin market, with privacy coins Monero (XMR) and Zcash (ZEC) both falling around 7%.
- XRP dropped more than 10% after liquidations totaling $30 million affected its price.
The fall became steeper around 09:00 UTC, pushing XRP from $1.44 to $1.35. However, the derivatives exchange token MYX saw a 4% increase, contributing to a 56% gain year-to-date.
The bitcoin-focused CoinDesk 20 (CD20) Index suffered an 8.34% loss, while the altcoin-oriented CoinDesk 80 (CD80) dropped by 5.92%. Various altcoins are now in a pronounced downtrend, marked by lower lows and highs reminiscent of the 2022 bear market.
