The once-correlated dance between cryptocurrencies and American stocks has come to an abrupt halt. In a worrying sign for the digital asset market, Bitcoin and altcoins have plunged in recent weeks, leading to substantial losses for investors.
Bitcoin Stalls Below $60,000
The poster child of crypto, Bitcoin, continues to languish below the psychologically important $60,000 mark. This consolidation phase has dragged down the entire market, with the total market capitalization of all cryptocurrencies dipping to a precarious $2 trillion.
The pain isn’t limited to Bitcoin. High-flying altcoins like Mantra (OM) have witnessed a brutal correction, losing nearly 35% from their monthly highs. This puts Mantra’s market cap at a precarious $774 million.
Cardano, once touted as the “Ethereum killer,” has been on a downward spiral for the past four weeks. Its price now sits at its lowest point since October 2023, a staggering 60% decline from its 2024 peak and a gut-wrenching 90% fall from its all-time high. This has shrunk Cardano’s market cap from a lofty $90 billion to a meager $11.6 billion.
The woes extend to Polygon and VeChain as well. Polygon continues its descent, hovering near its lowest level since June 2022. VeChain finds itself back at its November 2023 price point of $0.022.
Dwindling Trading Activity
This crypto downturn is accompanied by a sharp decline in trading volume across both centralized and decentralized exchanges. Data from CoinMarketCap paints a grim picture, with the 24-hour volume plummeting from a year-to-date high of over $151 billion to a mere $64 billion as of Friday. This suggests waning investor confidence and a potential exodus from the market.
Decentralized exchanges (DEXs) haven’t fared any better. DeFi Llama reports a significant downtrend in trading volume across Ethereum DEXes (over 55% drop in the past week) and other major players like Solana, Arbitrum, BNB Chain, and Base Blockchain (all experiencing over 30% decline in the past seven days).
The usually volatile futures market has also taken a breather. Bitcoin’s open interest, a measure of outstanding contracts, currently sits at $29 billion, down from $37 billion in July. This indicates a cautious approach from investors in the face of price volatility.
The recent bloodbath can be attributed to the wave of liquidations that swept through the market two weeks ago as global asset prices tumbled. Bullish liquidations on Monday of last week reached a staggering $700 million, the highest level since April this year.
Hope on the Horizon?
Despite the current turmoil, analysts remain cautiously optimistic about a potential crypto comeback in the coming months. Here are some potential catalysts:
- Fed Pivot: There are growing expectations that the Federal Reserve will start cutting interest rates in September as economic growth slows. Rising unemployment figures and positive trade data may incentivize the Fed to ease monetary policy, historically a boon for riskier assets like Bitcoin.
- End of Summer Slump: Historically, cryptocurrency markets experience a lull during the summer months, followed by a bounce-back in the fall. This seasonal trend could offer some relief to investors.
- US Presidential Election: The upcoming US presidential election could inject some volatility into the market, with some believing Kamala Harris’ potential victory could negatively impact the industry. However, history suggests Bitcoin has thrived under both Democrat and Republican administrations.
Also Read: Bitcoin (BTC) ETF Appetite Grows – 44% Of Filers Boost Holdings
While Bitcoin battles to regain its footing, data indicates that Cardano and Polygon are losing their grip on the market. Cardano, once hailed as a viable alternative to Ethereum, appears to be struggling for market share in key DeFi sectors. Polygon, though still a major player, faces stiff competition from emerging layer-2 networks like Arbitrum and Base. These developments might affect their token prices in the near future.
The crypto market is experiencing a period of significant correction. While the short-term outlook remains uncertain, long-term investors still hold onto the potential of digital assets. With the Fed’s monetary policy and the US election looming large, the coming months will be crucial in determining the future trajectory of the crypto space.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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