Some of the major cryptocurrencies have been hit by the wider sell-off in equity markets this week, underlining the fact that crypto may not be the safe haven from volatility some investors were hoping for. The claim that Bitcoin is an alternative to gold is being called into question.
Bitcoin, which was trading at close to the 70,000 mark on 29 July, already selling off hard, and hit a recent low of $49,500. This does seem to have created a buying opportunity for traders, with BTC rallying off that bottom established on Monday and now trading at $57,368.
Crypto crash surprised small traders
The crypto market crash caught many by surprise, occurring at an unprecedented pace, largely influenced by the Nikkei, which suffered its worst day since 1987 at the start of the week. This downturn was closely tied to the yen carry trade. Notably, BTC usually shows little movement on Sundays, but this event unfolded around the Monday open (UTC).
Despite the gradual price decline, retail investors consistently attempted to catch the bottom, particularly as the weekend approached. Crypto trading platforms reported retail investors were consistently jumping back into the market early in the week. Ethereum stood out in particular as a favoured long during this week’s volatility.
“At the local bottom, we observed a significant amount of fear, followed by persistent greed, which marked the top,” said Shubh Varma, an analyst at Hyblock, a crypto platform. “Interestingly, this sentiment did not waver despite the decreasing price. This pattern underscores the volatile and often irrational nature of retail trading behavior, highlighting the need for caution and informed decision-making in such turbulent markets.”
Hyblock said the retail long percentage has notably decreased across major cap crypto, indicating a potentially longer term shift in retail traders’ behavior. Specifically, ETH’s retail long exposure has dropped to the 62nd percentile in the course of the week. This reduction in retail longs could signal a consolidation phase where the market is shaking out weaker hands, potentially paving the way for stronger, more sustainable growth.
Solana also sees a 30% drop
Taking a look at Solana, as an example of activity in the main altcoins, the recent 30% price drop is definitely being attributed to a broader market downturn.
Altcoins, including Solana, are highly sensitive to investor sentiment. When the overall market turns negative, investors tend to become risk-averse, leading to significant price declines for these alternative cryptocurrencies.
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Solana’s technical indicators, such as moving averages, RSI (Relative Strength Index), and MACD (Moving Average Convergence Divergence), may have signalled a bearish trend, causing traders and algorithms to react accordingly, thus impacting the price.
In the past week, the price of Bitcoin dropped by 20% due to an economic slowdown in the US job market, prompting traders to sell their assets, including cryptocurrency. Additionally, unwinding JPY carry trades by investors are affecting the crypto markets due to the rate hikes by the Bank of Japan.
Solana sees network congestion
Solana faced network congestion and downtime due to a surge in demand for decentralized applications. Such technical challenges can lead to uncertainty and affect investor confidence.
Solana has the potential to rebound if the overall market sentiment improves; this can be driven by a number of factors, like Bitcoin’s price rebounding or Solana showing a price increase, which can be indicated by technical indicators and bullish news or institutional interest.
