All top 20 cryptocurrencies have recovered well in the past 24 hours

Bitcoin and Crypto Market Watch Tuesday, December 07, 2021 - 18:41

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As the first week of December comes to an end, contrary to what most anticipated, the market sentiment in the cryptocurrency market shifted from greed to extreme fear as the market leader Bitcoin (BTC) plunged by 26% over the weekend. Etheruem and other major altcoins reacted to the BTC price action and lost more than 20%. The total crypto market capitalization currently stands at $2.4 trillion (as of 5 pm IST). In this article, we dissect the reasons for the BTC crash, the current state of the market and what we can expect in the near future as we step into the last few weeks of 2021.

BTC flash crash

BTC, after briefly teasing $59,000 on December 1, took a sudden turn and broke down all the way to $42,000. The reason for this correction is speculated to be excess leverage found in the crypto markets.

Leverage is an investment concept where one can increase their buying power without having to increase the initial trading amount. It is primarily used to increase the potential returns though it is mostly undertaken by professional traders. So when a market is over-leveraged, it means there is a lot of debt used for trading in the system.

Often considered “healthy” by crypto experts, the BTC market generally flushes out excess leverage by liquidation of all the traders positions and the result is usually a cascading effect as stop losses get filled leading to a flash crash.

BTC, however, recovered quickly as long term holders stepped in near the $42,000 region to push it beyond $50,000 in the last three days. Having said that, BTC is still exposed to high risks of volatility until it reclaims the $52,000-$53,000 zone. For the short term, BTC will enjoy support near $48,000 and $50,000. BTC is currently trading near $51,400, up by 8% in the last 24 hours.

Ethereum resists while Polygon surges

Ethereum (ETH), the second largest cryptocurrency, was no exception to the volatility of BTC as it sank more than 20% to the lows of $3,500. But ETH’s recovery was faster than the rest of the market as it reclaimed the major psychological level of $4,000 on the same day. ETH is currently trading near $4,400 with a 11.3% gain in the last 24 hours. ETH has shown considerable strength/resistance against BTC during the correction indicating strong network effects built around the decentralized finance (DeFi) ecosystem.

Polygon (MATIC), a layer 2 on Ethereum network, has gained more than 30% in the last day to currently trade at $2.33. This price action is attributed to the reports of venture capitalists like Sequoia Capital India and Steadview Capital planning to invest around $50-$150 million in the Polygon network through the purchase of MATIC tokens.

With BTC leading the way, all top 20 altcoins by market capitalization have registered more than 10% gains except for Binance Coin (BNB) which posted a moderate 8% gain. Solana (SOL) has secured the fifth spot from Cardano (ADA) with a market cap lead of $12 billion dollars. However, ADA has had an uptick from the previous day by 16% as Cardano's first fully functional decentralised exchange (DEX) SundaeSwap launched its public testnet with mainnet slated in the coming weeks.

BTC short-term outlook

As the excess leverage found in the derivatives market got reset by the flash crash, analysts claim that BTC is due for consolidation with occasional volatility before heading towards $60,000 as we head into the new year. According to the analytics firm CryptoQuant, Bitcoin whales (large holders) are still depositing BTC to exchanges. This indicates that the whales are positioning themselves to take advantage of the price swings. We anticipate Ethereum and associated coins to drive the market forward while BTC consolidates.

Disclaimer:This article was authored by Giottus Cryptocurrency Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.



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