Traders’ selling sentiment eased on Tuesday, and the cryptocurrency market rebounded across the board.
Bitcoin
After hitting a low of $58,433 on Monday evening, Bitcoin rebounded to above $61,000 in early trading on Tuesday, and then rose to above the $62,000 support level by midday. At the time of writing, the BTC trading price was $62,086, with a 3.4% increase in 24 hours.
Altcoins
Benefiting from Bitcoin’s recovery, all but 8 of the top 200 tokens by market capitalization saw gains. The largest increases were in Brett (BRETT), which rose 26% to a trading price of $0.1672, followed by dog wif hat (WIF) with a 23.8% increase, and Dog (DOG) with a 22.1% increase. The biggest decreases were in Lido DAO (LIDO), which dropped 1.9%, Tellor (TRB) with a 1.8% decrease, and Curve DAO Token (CRV) with a 1.2% decrease.
The overall market cap of cryptocurrencies is currently $2.29 trillion, with Bitcoin’s market share at 53.5%.
Recent Weakness
Despite many attributing the market correction to potential selling pressure from Mt. Gox, some analysts have pointed out that the impact of Mt. Gox on the market is not significant. Instead, they suggest that the cryptocurrency market is simply experiencing a typical post-halving shakeout, combined with the common “summer doldrums” situation.
ETC Group analysts analyzed the recent weakness in the cryptocurrency market, attributing it to multiple factors including reduced inflows into mainstream coins, increased selling pressure from Bitcoin whales and miners, and heightened macroeconomic risks.
Data from Bybt shows that Bitcoin has fallen by over 20% from its high point in March, with altcoins suffering even greater losses, averaging a 32.6% decline in market capitalization outside of Ethereum. Overall, the influx of funds into crypto assets has significantly slowed down since the launch of the US Bitcoin ETF, which analysts believe to be a major source of the first quarter’s price increase in 2024.
Yield App’s Chief Investment Officer Lucas Kiely stated in a report that BTC and the wider crypto market are proving that the old saying “sell in May and go away” still applies, as prices remain subdued. He also noted that macro factors have been and may continue to be the biggest drivers of Bitcoin prices.
Analysts warned that ongoing downgrades in global growth expectations, coupled with increased risks of a US economic recession, may continue to pose challenges to Bitcoin and other crypto assets in the short term. They also noted that changes in global growth expectations have been the most significant macroeconomic driver of Bitcoin’s fluctuations over the past six months, accounting for over 80% of its performance.
“Others are greedy when others are fearful, and fearful when others are greedy”
However, ETC Group analysts believe that the recent price decline may have surprised traders who are not confident in the long-term prospects of Bitcoin and the crypto market, and that the price may have bottomed out.
They stated, “Wall Street wisdom suggests that individual investors are most bullish at market tops and most bearish at market bottoms. In theory, overly bullish sentiment signals a market top, while overly bearish sentiment signals a market bottom. In fact, similar behavioral characteristics can be observed in the crypto asset market.”
The analysts concluded, “We believe that multiple indicators have shown that positions are unbalanced, market sentiment is bearish, and ‘weak hands’ have mostly exited the market. Considering all these indicators, we believe that the short-term risk/reward is becoming increasingly asymmetric, with relatively limited further downside risk. Therefore, we believe that the current market crash represents a good opportunity to increase investments in Bitcoin and crypto assets before significant events occur in the coming months.”