The cryptocurrency market experienced a significant downturn, with the total market cap dropping over 4.2% to approximately $3.8 trillion during the mid-North American session on Thursday. Bitcoin (BTC) was particularly affected, slipping more than 3% in just 24 hours, reaching a low of around $108,787 before making a slight recovery to about $109,693.
Notable altcoins such as Ethereum (ETH), Solana (SOL), and Dogecoin (DOGE) also saw declines, contributing to a wider drop of over 6% in the altcoin market. This bearish trend led to substantial liquidations in the leveraged crypto market, with a staggering $1.13 billion wiped out as traders faced the consequences of a long squeeze.
The recent market activity highlights several key factors contributing to the downturn. Firstly, the impact of a long squeeze has been profound, particularly since Monday when over $2.8 billion was liquidated from leveraged positions, predominantly affecting long traders. This scenario has shifted market sentiment, leading many traders to adopt a bearish outlook.
Technical analysis reveals that the market has been forming a short-term bearish trend in recent weeks. Bitcoin has been tracing a symmetrical falling trend over the past two months, with its price movements highly correlated to the overall crypto market. This suggests that the bearish sentiment may persist in the immediate future. Additionally, many investors have turned to gold as a safe haven asset, particularly following its recent parabolic price movement.
Market dynamics were also influenced by the Federal Reserve’s recent actions. Since the initiation of its first rate cut of 25 basis points on September 17, the crypto market has seen a cooling-off period. Traders had anticipated this rate cut and positioned themselves accordingly, which has led to a classic “sell-the-news” reaction, resulting in profit-taking.
Looking ahead, analysts are pondering the state of the altcoin market. Crypto analyst Benjamin Cowen predicts that the altcoin market will continue to decline relative to Bitcoin until the end of October, with expectations that Bitcoin dominance could rise above 60% in the coming weeks. Cowen suggests that past altseason rallies were premature, indicating that a substantial altcoin rally may not occur until November or later, especially after Ethereum potentially posts consistent new all-time highs.
The anticipated approval of spot altcoin ETFs by the U.S. SEC represents a potential turning point for the market, suggesting that an impending altseason could unfold before the year’send. This development could provide the necessary momentum for altcoins to gain traction and recover from their current downward trends.
As the market continues to grapple with these challenges, traders and investors are closely monitoring key indicators that will shape the future trajectory of the cryptocurrency landscape. The interplay of macroeconomic factors, regulatory milestones, and market sentiment will be crucial in determining whether the current bearish phase will indeed give way to a resurgence in altcoins.
