On Tuesday, Bitcoin regained some of its lost value, prompting experts to suggest that the market is nearing a bottom and could soon experience substantial gains. Major cryptocurrencies, including Ethereum and Bitcoin, saw significant declines on Monday, with Ethereum dropping by over 20 percent and Bitcoin by 11 percent. The derivatives market saw $827 million in liquidations, with long orders accounting for nearly $720 million. According to data from Alernative.me, the current market panic index is at 26, indicating a state of "panic." Several factors contributed to the market's sharp decline, including Bitcoin reaching a near six-month low of $49,445 on Monday.
Gracy Chen, CEO of Bitget, explained that historically, the crypto market needs to experience a sharp decline to reduce long positions and alleviate future selling pressure, which is crucial for subsequent market rises. She emphasized the importance of monitoring macro market changes, particularly the sentiment index. If the VXX index begins to decline, it would signal a reduction in panic sentiment.
Concerns about the defunct Mt.Gox exchange repaying its creditors and Jump Crypto's apparent liquidation of hundreds of millions of dollars in crypto assets, especially Ethereum, have exacerbated the market sell-off. However, technical indicators are now showing oversold conditions, and the Crypto Fear and Greed index is flashing "Fear," typically a sign of a price bottom. Simon Peters, a crypto analyst at eToro, noted that a rebound could occur in the coming days, though the extent of the rebound remains uncertain.
Shivam Thakral, CEO of BuyUcoin, highlighted that the global crypto market has seen a significant shift, with a market cap of $1.89 trillion, reflecting a 12.29 percent decrease in the last day. Despite Bitcoin dropping below $50,000, its dominance has slightly increased to 56.56 percent, indicating resilience amid market volatility. Thakral attributed the recent price decline to rising interest rates by central banks, geopolitical tensions in the Middle East, and concerns about the US economy, which have dampened investor sentiment. However, Bitcoin's strong market presence suggests potential for recovery and growth as market conditions stabilize.
The broad market sell-off, driven by fears of a recession, has led to a reallocation of capital away from higher-risk assets, including digital currencies. This trend has been intensified by recent developments in the US presidential race, which some market participants view as potentially unfavorable to cryptocurrencies. Historically, summer months in the crypto market have been slower, with lower returns, and these seasonal dynamics may also be influencing the current market conditions.
Despite these challenges, Binance CEO Richard Teng does not view this as indicative of a long-term negative trend for the crypto market. He expects the Federal Reserve to cut interest rates in September, which should improve the outlook for the US economy. With the presidential election still some time away, there remains significant potential for market fluctuations. As the election approaches, the market is likely to react to candidates' positions on cryptocurrencies.
