The cryptocurrency market has faced a notable slowdown, losing 5% in value over the past 48 hours. The market capitalization now stands at $3.19 trillion, its lowest level in five days. This crypto market crash comes as Bitcoin and other major assets are under heavy selling pressure amid global developments and Black Friday.
US President Joe Biden announced that Lebanon and Israel had agreed to a US-brokered proposal to end the conflict involving Hezbollah.
Meanwhile, uncertainties in traditional markets persist, fueled by tariff threats from former US President Donald Trump. Meanwhile, the cryptocurrency market’s Fear and Greed Index fell to 75, its lowest level in two weeks.
Bitcoin Overbought Conditions Trigger Crypto Market Crash
Data from CryptoQuant shows that Bitcoin’s profit-loss (P/L) ratio has reached levels comparable to its March 2024 high of $73,400, indicating significant profit-taking from long-term holders. term.
Bitcoin is seen by investors as a hedge against geopolitical instability. However, Biden’s announcement of progress in the Lebanon-Israel conflict has diminished demand for safe havens.
Source: CryptoQuant
Meanwhile, recent analysis found that long-term holders moved $60 billion worth of Bitcoin supply over the past 30 days, with November marking the largest profit-taking of this market cycle. This behavior, often seen near market highs, has increased selling pressure, with retail investors absorbing supply during uptrends.
Additionally, a bearish divergence between Bitcoin price and the Relative Strength Index (RSI) on the daily chart signaled an overbought market, further preventing the asset from crossing the $100,000 level.
Futures Market Reflects Rising Volatility and Downside Risks
The crypto market crash also extended to the Bitcoin futures markets, where overleveraged positions fueled volatility. Nick Forster, founder of Derive, noted that traders are turning to hedging strategies, as evidenced by a 30% drop in the call-put bias index for Bitcoin options expiring on December 27.
“Traders protect themselves against possible price declines,” Forster explained. Options data suggests there is a 68% chance Bitcoin hits $81,493 or climbs to $115,579 by the end of December. There is also a 5% lower probability of extreme moves, such as a decline to $68,429 or a rise to $137,645. The impending expiration of $11.8 billion worth of Bitcoin options on December 27 could trigger significant price swings.
Although volatility remains high, Forster noted that the seven-day and 30-day implied volatility levels for Bitcoin have remained stable at 63% and 55%, respectively. Market observers closely monitor the futures market as it remains a key driver of short-term price movements.
Mixed Performance for Altcoins During Crash
Altcoins have shown a mixed response to the current crypto market crash. On the losing side, The Sandbox (SAND) fell 12.03%, while Stellar (XLM) and Decentraland (MANA) fell 10.07% and 8.24%, respectively. Other notable decliners include Arbitrum (ARB), Maker (MKR), and Ethereum Classic (ETC), all of which saw losses greater than 5%.
On the other hand, some altcoins managed to gain despite the market sell-off. Fantom (FTM) led the gains with a 13.86% increase, followed by Sei (SEI) and Injective (INJ), which rose 13.55% and 13.05%, respectively.
Algorand (ALGO) also saw a 10.59% rise, alongside other gainers like Sui (SUI) and Theta Network (THETA). Analysts suggest that as Bitcoin consolidates, capital could flow into certain altcoins.
Will the crypto market crash stabilize or continue to decline?
The crypto market crash has raised the question of whether the market will recover or face further declines. Michael van de Poppe, founder of MN Trading, pointed out that the market is showing signs of overheating, including high volatility and an increase in margin positions.
He suggested: “The chances of a prolonged sideways phase for Bitcoin are high, although some altcoins may continue to perform well. »
Despite near-term uncertainty, institutional investors like MicroStrategy remain optimistic. Founder Michael Saylor recently announced the company’s purchase of 55,500 BTC at an average price of $97,862, bringing his total holding to 386,700 BTC. This demonstrates continued confidence in Bitcoin’s long-term potential, even as the market faces challenges.
BTC price rebounded from the 24-hour low of $90,700. The price is currently trading at $93,300 as trading volume has increased amid whale dip buying.
Kelvin Munene Murithi
Kelvin is a distinguished writer with expertise in cryptography and finance, holding a bachelor’s degree in actuarial science. Known for his incisive analysis and insightful content, he has a strong command of English and excels in conducting in-depth research and providing timely updates on the cryptocurrency market.
Disclaimer: Content presented may include the author’s personal opinion and is subject to market conditions. Do your market research before investing in cryptocurrencies. The author or publication assumes no responsibility for your personal financial loss.
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