In just six weeks, the cryptocurrency market has "evaporated" $1.2 trillion
In just six weeks, the cryptocurrency market has "evaporated" $1.2 trillion
The cryptocurrency market is undergoing a severe adjustment, with a total market value plummeting by over $1.2 trillion in the past six weeks.
This round of selling began due to concerns over the overvaluation of tech stocks and the direction of U.S. interest rate policy. The price of Bitcoin has fallen more than 28% from its peak on October 6, reaching its lowest level since April, completely erasing its gains for the year. According to data provider CoinGecko, the total market value of over 18,000 digital currencies has decreased by 25% during this period.
New doubts about whether the Federal Reserve will cut interest rates in December have intensified market concerns. Lower interest rates typically enhance the appeal of cryptocurrencies and other risk assets, as they reduce the returns for investors holding short-term U.S. government bonds.
Matthew Dibb, Chief Investment Officer of Astronaut Capital, warned that under the current gloomy sentiment, a Bitcoin price of $75,000 may not be far off:
The sentiment in the cryptocurrency market is quite bleak, and has been so since the leverage collapse in October.
The next support level is $75,000, and if market volatility remains high, it could reach that price point.
Liquidation of Leverage Triggers Chain Reaction
The market crash on October 10 became a turning point for this round of decline. According to monitoring by trading platform Coinbase, $20 billion in digital currency leverage positions were liquidated that day, marking the largest single-day liquidation on record.
Ryan Rasmussen, Head of Research at Bitwise Asset Management, stated:
Cryptocurrency investors love leverage;
We see traders over-leveraging time and again, thinking this time will be different.
David Namdar, CEO of CEA Industries, described the current market conditions as "the continued aftershock of the October liquidation event":
This sell-off is different in scale because the positions are larger, the leverage is deeper, and the liquidation takes longer.
Small Coins Suffer Heavy Losses
Higher-risk small-cap tokens have taken the hardest hit.
The MarketVector Digital Assets 100 Small Cap Index has fallen to its lowest level since November 2020, indicating a sharp decline in investors' risk appetite for speculative assets.
Among the top 20 cryptocurrencies by market capitalization, six have fallen more than 40% this year, with Dogecoin, Sui, and Avalanche each down about 50%. Over the past five years, the small-cap coin index has dropped nearly 8%, while the large-cap coin index has surged about 380%.
Apollo Crypto portfolio manager Pratik Kala stated:
A rising tide lifts only quality boats.
Risk warning and disclaimer
The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment based on this is at one's own risk
