Altcoins commenced the week with $1.5 billion in futures liquidations, as significant tokens such as ETH, SOL, XRP, and DOGE underwent a correction. The market capitalization of altcoins achieved a weekly close exceeding $1.6 trillion last week, fueled by heightened optimism regarding an impending alt season. However, investor sentiment towards an alt season may have moderated following Bitcoin's breach of the $100K threshold.
Ethereum (ETH), Solana (SOL), XRP, and the broader altcoin market faced a downturn on Monday, resulting in more than $1.5 billion in futures liquidations. This correction indicates that Bitcoin's dominance continues to overshadow altcoins, despite ongoing speculation regarding an impending alt season.
Altcoins experience a decline amid rising hopes for an alt season
Prominent altcoins such as ETH, SOL, XRP, BNB, and DOGE recorded losses exceeding 4% on Monday, following indications of fatigue among bullish investors. This pullback occurs after the altcoin market achieved a weekly close surpassing $1.6 trillion for the first time since 2021.
Several members of the cryptocurrency community have posited that the recent downturn may be attributed to diminished expectations for an alt season following Bitcoin's surge past the $100,000 mark.
On Monday, Bitcoin experienced a modest decline of 3.2%, resulting in approximately $185 million in liquidations. In contrast, altcoins faced a significant setback, with futures liquidations exceeding $1.5 billion, according to data from Coinglass. It is noteworthy that many bullish investors who anticipated a continued rise in altcoins were effectively removed from the market, as liquidated long positions in altcoins reached a two-year peak of $1.4 billion.
Such substantial liquidations could potentially incite considerable fear, uncertainty, and doubt (FUD) among investors, prompting them to shift their assets into stablecoins or Bitcoin.
Nevertheless, insights from CryptoQuant CEO Ki Young Ju indicate that the previous rally in altcoins did not come at the expense of Bitcoin, as evidenced by the increase in stablecoin liquidity within the market. This implies that fresh capital entered the market to support the rally rather than merely reallocating funds from Bitcoin.
This situation has heightened optimism among cryptocurrency enthusiasts, who believe that the current correction represents a temporary setback that could propel the altcoin market capitalization to new heights.
Historical analysis of previous alt seasons suggests that such pullbacks can be beneficial for altcoins. For instance, during the 2021 market cycle, altcoins experienced a significant decline shortly after reaching new highs in May 2021, only to recover and achieve new peaks by November.
Traders appear to be positioning themselves to view the recent decline as a potential buying opportunity. This trend is particularly noticeable in tokens such as SOL and TON, which are currently trading just below their previous all-time highs.
Data from CryptoQuant indicates that these two assets are among the top contenders to surpass their previous all-time high prices, following the recent performances of BNB and Bitcoin.
"Both projects benefit from robust fundamentals, characterized by active development teams and engaged networks. Given these metrics, it is plausible that these coins may emulate Bitcoin's trajectory in the near term," stated CryptoQuant analyst Maartun.
Moreover, the recent downturn in the market can be attributed to the consistent correlation of altcoins with Bitcoin, especially after it fell below $100K over the weekend. Should this correlation persist at high levels, the chances of a significant alt season remain diminished.
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