In the wake of a significant rally led by major large-cap altcoins, following Bitcoin’s (BTC) remarkable ascent past $89k, the cryptocurrency market faced substantial downturns over the past day. As Bitcoin’s price flirted with levels below $85.2k on Tuesday, the total crypto market capitalization experienced a 3% decline, settling around $3.06 trillion early Wednesday, November 13, during the Asian trading session.
Amidst the prevailing belief in a macro crypto bull market, traders are urged to brace themselves for potential corrections ranging from 20% to 40%. Managing risks prudently is essential as the market navigates these volatile phases.
Factors Contributing to the Recent Crypto Selloff
Leveraged Market Cool-off
The cryptocurrency sector has witnessed over $2 billion in forced liquidations over the past three days. With increased volatility in the crypto space, more than $928 million was liquidated in the last 24 hours, predominantly affecting long positions. This significant liquidation event has led to a reduction in the initial short squeeze, with numerous traders pivoting towards a midterm correction strategy.
On platforms like Binance, over 51% of leveraged traders are currently positioned short, indicating a prevailing sentiment of caution regarding further market rallies in the immediate future. With this shift, traders are advised to remain vigilant and adapt to the evolving market dynamics.
Major Shift in Crowd Sentiment
The recent breakout in Bitcoin’s price, spurred by political developments such as Donald Trump’s victory in the United States, has alleviated fears of further market capitulation. The fear and greed indices for Bitcoin and Ethereum have surged past 80%, reflecting a state of extreme greed among investors. Moreover, US spot Bitcoin ETFs have attracted over $8.7 billion in net cash inflows in the past month.
Adding to the bullish sentiment, MicroStrategy has commenced a substantial acquisition plan for Bitcoin, initiating a $2 billion purchase as part of a broader $42 billion strategy. Despite this optimism, the crypto market frequently undergoes midterm corrections when investor sentiment becomes exceedingly bullish.
Midterm Expectations
Based on historical patterns, Bitcoin is anticipated to maintain a stronghold against the altcoin market, at least until the initial weeks of January 2025. It is expected that Bitcoin will establish a crucial support zone between $83,250 and $85,800, a range where approximately 312,000 addresses purchased 282,000 BTCs.
Meanwhile, altcoins are projected to continue their upward trajectory, buoyed by recent bullish moves in Dogecoin (DOGE), Solana (SOL), and Ethereum (ETH). As these cryptocurrencies gain momentum, market participants should closely monitor their developments to capitalize on potential opportunities.
In conclusion, while the crypto market currently faces headwinds, the long-term outlook remains compelling. Investors should remain informed and strategically positioned to navigate the dynamic landscape of cryptocurrency investments.
