The crypto market is now placed under another challenge. Over the past day, bitcoin prices have dropped by around $2,000, causing the crypto market to lose a significant amount of value. As it stands now, the crypto market cap is down over $100 billion and is now dangerously close to falling below $1 trillion once again. This is expected to affect the market sentiment, creating further fear in the market.
Market turned into fear
The crypto market was witnessing some correction with the anticipation around the Ethereum merge. But as the enthusiasm waned, the market witnessed a sharp fall in the prices. Bitcoin reached $25,000 at its peak in this previous recovery cycle. However, it has shed most of those gains.
With this, the crypto market sentiment recovered for some time after bitcoin’s rally started. At its highest point, the Fear and Greed Index has a score of 42, the highest point in four months. This has put it as close to greed, but the market had other ideas.
Bitcoin price had retreated below $22,000, and with it, there was a decline in market sentiment. On Thursday, it closed with a low of 30, which put it firmly back in the zone of fear. At the time of writing, the retracement appears to have fallen from $1.1 trillion in the crypto market to nearly $1 trillion.
Crypto market cap losses $100 billion | Source: Crypto Total Market Cap on TradingView.com
As the fear in the market is back, investors are wary when it comes to investing in the crypto market. Purpose traders showed fatigue in the market last week, causing bitcoin’s funding rate to drop below neutral. Now, the rest of the market is following suit.
Recovery in the crypto market?
As the market is only starting to retreat, it is likely that the correction is not over. Such a correction is expected when the market has moved up so much in such a short period of time. It helps in adjusting the prices with values that reflect their current market condition.
This means that there may still be some downside in the price of bitcoin. For now, it has been speculated that the price has established a bottom at $17,600, so the bears would like to attempt a test of support at this point. Historical movement also supports such movements as was done with previous bear markets.
Additionally, the weekend is already here, and it is a time known for low liquidity. This means that it is likely that bitcoin will trend lower through the weekend. If the price of bitcoin falls below $21,000, the crypto market will drop below $1 trillion.
Featured image from Coinmama, chart from TradingView.com
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