The crypto market is currently undergoing a notable correction, with Bitcoin and other digital assets registering sharp declines in recent days. BTC, which reached an all-time high of 109,000 USD in January, fell below 80,000 USD - a depreciation of over 25%.
This retracement has also hit other high-cap coins like Ethereum, XRP, Cardano, or Solana, which have lost value significantly in a very short period.
Understanding the reasons behind this new bearish cycle is essential to decide whether to sell or hold positions. Therefore, we review the factors that are driving the decline and, in the end, address what strategies can be considered: is it preferable to sell or hold (HODL) assets for the long term?
Factors impacting the crypto market
1. Regulatory pressures and legal uncertainty
In recent months, stricter regulations have been approved or reinforced, both in the United States and in Europe. In the U.S., the SEC has intensified oversight on exchanges and cryptocurrency issuers, while the Treasury Department is considering selling seized crypto assets - which could exert selling pressure in the short term.
In Europe, the MiCA regulation (Markets in Crypto-Assets) increases compliance requirements for crypto companies, demanding greater transparency and potentially restricting some tokens. Although in the short term this may reduce volumes and increase caution, many investors see such regulations as a step toward legitimizing this sector, paving the way for more consistent institutional investments.
2. Macroeconomic factors and risk aversion
The global situation has also pushed the crypto market down. With inflation still high in several Latin American countries (as well as internationally), the Federal Reserve (Fed) and other central banks maintain restrictive monetary policies, raising interest rates. This motivates many investors to seek more stable and predictable assets, such as Treasury bonds, to the detriment of riskier assets like cryptocurrencies.
Likewise, the threat of a possible global economic slowdown and instability in traditional markets - driven by drops in technology stocks or companies linked to Web3 - reduces the demand for crypto assets. With less capital entering the ecosystem, prices suffer even more.
3. Trade tensions between the U.S. and China
The increase in trade tensions between the United States and China, with new import tariffs and restrictions on key technological exports to the Asian country, generates instability in multiple sectors, including crypto.
In light of geopolitical uncertainty, institutional investors prefer to reduce their exposure to highly volatile assets like Bitcoin and altcoins. Additionally, there is fear that China might respond with even more restrictive policies regarding cryptocurrencies, which would add more volatility.
If we combine this factor with the previous one, the conclusion is clear: in times of chaos and international tensions, many prefer to turn to less volatile assets. And since the crypto world is known for its high volatility, bearish pressures intensify.
4. The Bybit hack of 1.5 billion USD
Recently, the exchange Bybit suffered one of the largest hacks in crypto history, with a theft of over 1.5 billion USD in assets. This incident undermined investor confidence, reigniting discussions about the security and vulnerabilities of trading platforms.
Many investors sold part of their positions fearing new hacks and a potential collapse of centralized exchanges (similar to what happened with FTX in 2022). Additionally, the Bybit crisis impacted market liquidity, as numerous users withdrew their funds and transferred them to other platforms, reducing efficiency and raising short-term volatility.
5. Breakdown of technical supports and cascading effect on liquidations
From a technical standpoint, Bitcoin's drop below the 200-day moving average is a concerning indicator for many traders, as that line is considered a relevant support. Once broken, it often fosters more selling.
Additionally, the sharp drop in BTC forced the liquidation of billions of USD in leveraged positions. Many margin traders were forced to sell their holdings to cover losses, generating a cascading effect that exacerbated price declines. This phenomenon causes greater fluctuations and adds instability.
Should I sell or hold (HODL) my cryptos?
The dilemma of selling or holding depends on several elements: investment goals, risk tolerance, and long-term vision regarding the crypto market.
Those with a highly concentrated portfolio in volatile altcoins may want to rebalance and reduce their exposure, reinforcing BTC and ETH, which tend to perform better in uncertain environments. Investors who trust in cryptocurrencies for the long term might resort to the Dollar-Cost Averaging (DCA) strategy, buying periodically regardless of the price, to soften the impact of volatility.
Furthermore, it is advisable to study on-chain movements, the entry of institutional capital, and regulatory trends to determine where the turning points in the market might be. If BTC recovers its 200-day moving average and accumulation by large investors grows, that could signal a bullish resurgence in the medium term.
Attention to risk in your portfolio!
The recent drop in cryptocurrencies has been triggered by a combination of factors: increased regulatory demands, geopolitical tensions, massive liquidations, and one of the largest hacks in the sector. Nevertheless, investors with a solid plan could find good opportunities, whether by adjusting their positions, diversifying, or adopting DCA.
The history of Bitcoin shows that periods of high volatility are a natural part of this market. The important thing is to stay calm, thoroughly evaluate the fundamentals, and make decisions based on a longer time horizon. With that perspective, many investors have managed to weather deep retracements and take advantage of recovery phases that typically arise afterward.
Finally, it is timely to recalibrate your risk profile in these scenarios. The crypto market requires evaluating the desired exposure and not letting emotions take over: buying at highs or selling at lows are common mistakes. If you handle the situation with coolness and study the dynamics of each cycle, you are more likely to come out stronger.
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