After the crypto market crash on October 10, bearish sentiment dominated, with on-chain data indicating a continued decline in digital asset prices. Bitcoin (BTC), for example, is near one of its worst weekly performances of the year, having seen a 6% decline over the past seven days.
The leading cryptocurrency has fallen below the critical $100,000 mark for four consecutive days. If this downward trend persists and is confirmed in the coming days, it could exacerbate the selling pressure and spark more fears in the market, which could lead to a broader price decline.
Near-term weakness expected to persist
From a broader perspective, the market presents a mixed picture. Solana (SOL) is down 20% year to date, while Chainlink (LINK) has suffered a 33% decline.
Although Bitcoin, XRP, and Ethereum (ETH) have seen gains this year, they have not outperformed the stock market, which is up 14% during the same period.
Interestingly, October also saw the highest weekly inflow into global crypto exchange-traded funds (ETFs), with $5.9 billion coming in in the first week alone, driven primarily by Bitcoin and large allocations to Ethereum. However, this did not result in further recoveries of these assets.
Recent announcements from the Federal Reserve (Fed) indicate that it will end its quantitative tightening (QT) on December 1, accompanied by a reduction in interest rates. This change is expected to inject more liquidity into the crypto financial system.
However, analysts at The Motley Fool warn that while increased liquidity does not guarantee higher cryptocurrency prices, stopping QT removes a lingering headwind.
They say that although the environment looked bleak in October, the political outlook suggests a more favorable climate going forward. It is therefore difficult to predict a deep bear market for cryptocurrencies at this stage, although short-term weakness will likely persist for some time.
Crypto market struggles for stability
Although the recent sell-off affected the entire market, the biggest losses were in altcoins. SignalPlus partner Augustine Fan noted that besides Bitcoin and Ethereum, the broader crypto market has been struggling for months, with little new investment flowing into alternative tokens or decentralized finance (DeFi) projects.
He stressed that, without new catalysts and amid ongoing concerns over security and regulation, general public participation in the market is likely to remain subdued.
Jeff Mei, chief operating officer of crypto exchange BTSE, attributed the latest decline in digital assets in part to concerns about the overvaluation of artificial intelligence (AI) stocks.
He warned that if a sell-off occurs in artificial intelligence and technology stocks, Bitcoin could potentially fall below the $100,000 threshold, with altcoins likely to see even steeper declines.
At writing, Bitcoin managed to climb back above the $103,000 mark. Yet the leading cryptocurrency is still 18% below the record highs of $126,000 reached just days before the infamous October 10 stock market crash.
Featured image of DALL-E, chart by TradingView.com
