After setting a new high last week, the cryptocurrency market has seen a wave of profit-taking, with both Bitcoin and Ether retracing, falling below $113,000 and $4,200, respectively, while macroeconomic headwinds and rising leverage ratios have further exacerbated market trends.
Bitcoin today (20th) dipped to a low of $112,647 but has since recovered to $113,787, down 0.9% over the past 24 hours.
FxPro Chief Analyst Alex Kuptsikevich warned that Bitcoin has fallen back to the price level of two weeks ago, breaking below the medium-term trend line (50-day moving average), which has intensified investors' concerns about Bitcoin's continued decline and could impact the entire cryptocurrency market, potentially dragging Bitcoin further down to $100,000, close to the 200-day moving average.
Alex Kuptsikevich added: "The overall cryptocurrency market cap has shrunk again by 0.4%, falling to $3.87 trillion, with the market breaking below previous resistance levels, prompting speculators to worry about further retracements, potentially even dropping to $3.6 trillion."
Ether similarly weakened, down 0.9% to $4,195, retreating more than 12% from recent highs, and retesting the key support level of $4,100. Other major cryptocurrencies performed even weaker, with Ripple (XRP) briefly dropping 4.1% to $2.89; Dogecoin (DOGE) fell 2.4% to $0.21, while Cardano (ADA) plummeted 6.6%, becoming the biggest loser among major tokens.
Macroeconomic pressures are intensifying.
Market sentiment quickly turned cold after Bitcoin hit a new high. US inflation data came in above expectations, cooling the market's hope for a rapid rate cut by the Federal Reserve, prompting short-term traders to take profits.
LMAX Group strategist Joel Kruger pointed out, "Since Bitcoin reached a new high last week, it has entered a slight correction phase," and "US inflation data exceeded expectations, undermining the market's expectations for a recent rate cut by the Fed, leading to a decline in market sentiment."
Ether's trend mirrored that of Bitcoin, with leveraged long positions exacerbating the decline. However, Joel Kruger emphasized that institutional capital inflow into Ether products remains strong, with increased ETF flows and corporate treasury allocations indicating that the medium-term outlook still has support.
Leverage risk intensifies; market fluctuations are inevitable.
Despite the pressure on the spot market, institutional capital continues to flow in steadily, providing some support for market sentiment. However, the high leverage accumulated in the derivatives market poses a greater risk of volatility.
Bitget Chief Analyst Ryan Lee stated: "The futures market's open interest has reached a new high, indicating that leveraged positions have accumulated excessively."
He warned that leverage is like a double-edged sword: if the market continues to rise, leverage will amplify gains, but it will also increase volatility, making Bitcoin and Ether more susceptible to sharp fluctuations driven by market sentiment changes.
Market attention is now turning to the Jackson Hole Global Central Bank Conference, where Fed Chairman Jerome Powell will speak. It is widely believed that Powell's statements regarding the autumn policy stance will affect the synchronized fluctuations of the stock market, foreign exchange, and crypto assets.
The market is in a state of panic, and retail sentiment is pessimistic.
Market sentiment indicators have also shown sharp changes. Santiment data indicates that after Bitcoin fell below $113,000, retail traders' attitudes underwent a dramatic 180-degree shift, with community sentiment over the past 24 hours being the most pessimistic since June 22, when the market also experienced a panic sell-off due to concerns over the Middle East war.
However, Santiment pointed out that excessive negative sentiment often serves as a "buying signal." When the market is "bleeding profusely, and fear is at its peak," it is easier to brew a short-term rebound.
Currently, the Bitcoin Fear & Greed Index has dropped to 44 (out of 100), falling into the "fear" range.
"Market leverage is too high, retail sentiment has turned bearish! Experts warn: Bitcoin may retract to $100,000" This article was first published on (Blockbit).
