Market Wrap: Cryptocurrency Promote-Off Pauses as Sentiment Turns Bearish

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Cryptocurrencies were mostly lower on Monday, although market conditions stabilized after the sell-off over the weekend. Bitcoin was trading above its 200-day moving average (currently at $ 46,386), suggesting that selling pressures may ease in the short term.

Analysts pointed out that excessive leverage in the Bitcoin futures market contributed to the widespread sell-off. And despite the scope for a short-term price surge, some analysts remain cautious about Bitcoin’s price development over the next few weeks.

“The last two times BTC challenged the 200-day moving average were good buying opportunities as the market remained structurally bullish but was simply over-indebted.” Sean Farrell, digital strategist at Fundstrat Global Advisors, wrote in a newsletter.

Current prices

  • Bitcoin (BTC): $ 48,954, + 0.5%
  • Ether (ETH): $ 4,226, + 2.7%
  • S&P 500: + 1.2%
  • Gold: $ 1,779, -0.2%
  • 10-year Treasury yield closed at 1.443%

“It must be noted, however, that one of the most important Bitcoin bull market indicators – the simple 20-week moving average – has now been decisively breached, so that the outlook is currently bearish in the short to medium term,” said Anto Paroian, Chief Operating Officer at Crypto hedge fund ARK36 wrote in an email to CoinDesk.

“The sharp price movement in the digital asset market could also indicate that some investors are preparing to move into a risk-free mode for the time being,” wrote Paroian.

Still, it seems that some investors are okay with investing in speculative investments again. For example, traditional stocks stabilized on Monday as volatility decreased. And in the crypto markets, alternative coins like Ether, Polygon’s MATIC token and Solana’s SOL token have outperformed Bitcoin in the past week, suggesting greater risk appetite among investors.

Extreme liquidation

The chart below shows the largest one-day drop in open interest in BTC futures since September 7th. And blockchain data suggests that the sell-off accelerated as the BTC price fell below break-even (cost basis) for many traders who were long.

“The cost base for short-term Bitcoin holders was $ 53,000, and when we broke that level there was another big drop,” said Martha Reyes, director of research at Digital Asset Prime Brokerage and Exchange BEQUANT.io.

Bitcoin drawdown

Bitcoin is down nearly 30% from its all-time price of around $ 69,000, the largest drop (percentage drop from high to low) since September. Typically, Bitcoin experiences strong drawdowns of between 10 and 20% even in a bull market. However, in a bear market, drawdowns can go well in excess of 30% and it can take several months for the price to recover.

Altcoin summary

  • Polygon Captures Sequoia, Steadview’s Fundraising Attention: A group of venture capital investors including Sequoia Capital India and Steadview Capital are in talks to support the Ethereum-scaling Polygon network with an investment of between $ 50 million and $ 150 million , reported Jamie Crawley from CoinDesk. The investment would supposedly come in the form of a purchase of MATIC tokens, the cryptocurrency that powers the Polygon network. Polygon is a “sidechain” that aims to solve the scalability problems associated with the Ethereum network, which suffers from congestion and high fees.
  • Metaverse tokens collapse amid broader crypto market sell-off: Decentraland (MANA), the leading metaverse asset according to cryptocurrency analyst Messari, is down 25% in the past seven days, CoinDesk’s Lyllah Ledesma reported. MANA’s decline is closely followed by Axie Infinity’s AXS token, which has fallen 23% in the past seven days. AXS ‘market capitalization is $ 6.21 billion. It had peaked at $ 9.77 billion on November 7, according to CoinMarketCap. Matthew Dibb, Chief Operating Officer and Co-Founder of Stack Funds, said that while the future of the Metaverse and gaming tokens looks bright, very little is truly embraced in the present.
  • CoinDesk 20 wins $ ATOM, $ SOL and $ ICP and replaces $ UNI, $ AAVE and $ GRT: Cosmos’ Atom, Solana’s mother currency and Internet computer (formerly Dfinity) have all moved into CoinDesk 20 this quarter, in one shift, in of the Web 3 software platforms, tools and infrastructure are replacing decentralized finance (DeFi) and DeFi-related applications as one of the most widely traded cryptocurrencies. The CoinDesk 20 is a list of the top 20 cryptocurrencies by trading volume, measured against a selected list of trusted exchanges.

Relevant news

  • CME Group introduces micro-ether futures
  • BitMart CEO Says Stolen Private Key Behind $ 196 Million Hack
  • Crypto mining stocks decline when bitcoin and ether fall
  • Craig Wright will not be held responsible for breach of Kleiman’s business partnership

Other markets

Most of the digital assets in CoinDesk 20 ended the day lower.

Notable Winners as of 9:00 PM UTC (4:00 PM ET):

  • Polygon (MATIC), + 10.3%
  • EOS (EOS), + 8.1%

Notable Losers:

  • Algorand (SOMETHING), -3.1%
  • Chain link (LINK), -1.4%
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