In the last 24 hours, cryptocurrency markets have experienced a significant decrease in prices, resulting in an overall market capitalization drop of nearly 3% to $1.27 trillion. This pullback follows a strong rally in digital asset prices throughout October, and it coincided with a notable increase in greed sentiment, as indicated by the Crypto Fear and Greed index, which reached its highest level in two years.
Alex Kuptsikevich, a senior market analyst at FxPro, suggests that the current situation aligns with the idea of Bitcoin (BTC) as a safe-haven asset. This means that as demand for traditional equities rises, it can work against the value of the largest cryptocurrency, Bitcoin.
However, Kuptsikevich advises caution when relying on Bitcoin’s defensive status. He argues that Bitcoin is still very sensitive to changes in overall risk appetite and often leads shifts in the broader market, causing significant fluctuations.
Its latest turnaround could foreshadow an intensifying sell-off in equities.
According to Kuptsikevich, it seems that Bitcoin has entered a correction phase due to the broader risk-off sentiment in the market. However, the long-term positive trajectory for Bitcoin remains intact as long as its prices remain above $32,300. On the other hand, Ethereum has fallen below its 200-day moving average, which is around $1,770, making it susceptible to further declines towards $1,740 unless there is a rapid shift in market sentiment.
The recent pullback in the cryptocurrency market has occurred despite generally positive news. Market strategist Michael van de Poppe expressed confidence that the Federal Reserve has finished its tightening of monetary policy, which could benefit risk assets, including Bitcoin. Investment giant Fidelity has continued to praise Bitcoin as a growing savings technology and a hedge against inflation. Additionally, corporate adoption of Bitcoin continues, with MicroStrategy announcing additional Bitcoin purchases last month.
However, the cryptocurrency market is facing increasing regulatory scrutiny, particularly regarding stablecoins like PYUSD, which PayPal launched without oversight this summer. The SEC has reportedly initiated an investigation into PayPal’s stablecoin, highlighting the uncertain regulatory environment surrounding digital assets.
For now, the recent pullback in the crypto market seems more like a temporary pause rather than the beginning of a new bearish trend. However, sustaining the substantial gains of the past month may require ongoing favorable macroeconomic conditions. With ongoing recession risks and central banks planning further interest rate hikes, Bitcoin and other cryptocurrencies are likely to continue experiencing volatility.