Dogecoin, Ethereum, Solana, and XRP Crash by Double Digits While Bitcoin Falls Below $28,000
The crypto market begins October with a downward trend that is close to correcting. Bitcoin lost around 4 percent of its value during the hours of Friday night and now stands at less than $28,000, a level it held for a long time. Most altcoins follow the trend even more strongly. Dogecoin (DOGE), Solana (SOL), and Ethereum (ETH) are facing double-digit declines in the range of 10-13 percent. XRP also temporarily experienced a similar price drop.
Direct Correlation Between US Stock Markets and Cryptocurrencies
What causes uncertainty in the market? This question arises once again today, as the development in the stock markets is directly correlating with that in cryptocurrencies. In the US, concerns about rising interest rates by the Federal Reserve are triggering significant selling pressure. In addition, the ongoing budget discussions in the US Congress, which could lead to a shutdown, cause further uncertainties. At the same time, a bearish trend in technology stocks, notably amidst canceled IPOs (Initial Public Offerings) and a shift from venture capitalists towards risk-averse markets, contributes to the downward momentum.
What Role Does the Futures Market Play?
Another pressure point on cryptocurrencies is the winding down of futures positions on large crypto exchanges. This “winding down” often happens at the beginning of a new month to bring open contracts to closure or rollover. When on the sellers’ side, this can reinforce the current negativity in spot markets. The effect is amplified if the futures positions are large in volume and pinned to crypto heavyweights like Bitcoin and Ethereum.
Is It the Calm Before the Storm?
For seasoned observers of crypto markets, corrections in the range of 10 to 20 percent are nothing unusual. Bitcoin alone had increased in value by more than 60 percent year-to-date 2023, and some altcoins outdid this. Hence, the current scenario might also be seen as a welcome opportunity to accumulate positions at lower rates. The infamous volatility of cryptocurrencies has meant bargain hunters often profit in exactly such moments. However, uncertainties stemming from external factors such as regulations or broader market sentiment should be considered.
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